Question

A copy

store uses an average of 30 boxes of copier paper per day. The store

operates 260 days a year. The storage and handling costs for the paper are

$25 a year per box and it cost approximately $50 to order and receive a

shipment of paper.

a

. What order size would minimize the sum of annual ordering and carrying

costs?

b

. Compute the total annual cost using your order size from part a.

c. Except for rounding, are annual ordering and carrying costs always equal

at the EOQ?

d. The manager is currently using an order size of 200 boxes. The partners

expect a lean, cost effective operation. Would you recommend the manager

use the optimal order size instead of 200 boxes? Justify your answer.

Answer 1