A large law firm uses an average of 39 boxes of copier paper a day. The firm ope

Question

A large law firm uses an average of 39 boxes of copier paper a day. The firm operates 262 days a year. Storage and handling costs for the paper are $30 a year per box, and it costs approximately $57 to order and receive a shipment of paper

What order size would minimize the sum of annual ordering and carrying costs? (Round your answer to the nearest whole number.)

Compute the total annual cost using your order size from part a. (Round intermediate calculations and final answer to 2 decimal places. Omit the "$" sign in your response.)

Except for rounding, are annual ordering and carrying costs always equal at the EOQ?

The office manager is currently using an order size of 197 boxes. The partners of the firm expect the office to be managed "in a cost-efficient manner." compute total cost for this current order size. (Round intermediate calculations and final answer to 2 decimal places. Omit the "$" sign in your response.)

A large law firm uses an average of 39 boxes of copier paper a day. The firm operates 262 days a year. Storage and handling costs for the paper are $30 a year per box, and it costs approximately $57 to order and receive a shipment of paper

Explanation / Answer

a. At EOQ the annual ordering and carrying costs is minimized
EOQ = (2 x Annual Quantity x Cost Per Order / Carrying Cost Per Order)^1/2
   = (2 x 39 x 262 x 57 / 30)^1/2 = 197 boxes

b. Annual ordering cost = (262 x 39) x 57/197 = $2,956.48
Annual handling cost = 197 x 30/2 = $2,955
Total Annual Cost = 2,956.48 + 2,955 = $5,911.48

c. EOQ is the quantity of order where we can incurr the minimun inventory cost. at this level of purchse both total Carring and total ordering are equal since it is optimum level of ordering quantity.

d. Since the order is equal to EOQ thus anuual cost of the order is $5,911.48

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