Managing Supply Chain and Operations 1st Edition by Thomas Foster ,Scott Sampson,Cynthia Wallin,Scott Webb

Exercise 24

Two different suppliers have quoted different unit prices and payment windows for a commodity part used by an industrial company. Ihe purchasing manager for the part will decide on which supplier to use based on a price analysis that adjusts for the difference in the payment windows, thereby reflecting the opportunity cost of making earlier payments. The relevant information is as follows:

If the annual cost of capital for the company is 6 percent, which supplier is offering the better price given the opportunity cost required by making a payment earlier if supplier A is chosen?