Dusty is evaluating three bids to supply fence hardware for the 5 acres of pasture that need to be fenced.Breezy submits a bid of $40 per unit with a defect rate of 3%; Lady's bid is $50 per unit with a defect rate of 0.5%; and Spike's bid is $30 per unit with a defect rate of 5%.If a section of fence fails,it costs an average of $500 in losses and herding costs to round up all of the capybaras.Dusty believes it will take 500 units to fence in this pasture configuration; which supplier should win the business?
A) Spike
B) Breezy
C) Lady
D) no difference between Breezy and Spike

Question

Quizplus · Accepted Answer

To determine the best supplier, we need to calculate the total cost for each bid taking into account the cost of defects and failures.

For Breezy: 
Total cost per unit = $40 + ($500 x 0.03) = $55
Total cost for 500 units = $27,500

For Lady: 
Total cost per unit = $50 + ($500 x 0.005) = $52.50
Total cost for 500 units = $26,250

For Spike: 
Total cost per unit = $30 + ($500 x 0.05) = $55
Total cost for 500 units = $27,500

Based on these calculations, choosing Lady would be the best option as it has the lowest overall cost at $26,250 for 500 units.

Dusty Is Evaluating Three Bids to Supply Fence Hardware for the 5