Question: Emery Pharmaceutical uses an unstable chemical compound that must be kept in an environment where both temperature and humidty can be controlled. Emery uses 800 pounds per month of the chemical, estimates the holding cost to be 50% of the purchase price (because of spoilage), and estimates order cost to be $50 per order. The cost schedules of two suppliers are as follows:

Vendor 1 Vendor 2

Quantity Price/LB Quality Price/LB

1- 499 $17.00 1-399 $17.10

500-999 $16.75 400-799 $16.85

1000+ $16.50 800-1199 $16.60

a) What is the economic order quantity for both suppliers?

b) What quantity should be ordered and which supplier should be used

c) What is the total cost for the most economic order size?