Problem 13-4 A large law firm uses an average of 38 boxes of copier paper a day.
ID: 447374 • Letter: P
Question
Problem 13-4 A large law firm uses an average of 38 boxes of copier paper a day. The firm operates 261 days a year. Storage and handling costs for the paper are $32 a year per box, and it costs approximately $61 to order and receive a shipment of paper. a. What order size would minimize the sum of annual ordering and carrying costs? (Round your answer to the nearest whole number.) Order size boxes b. Compute the total annual cost using your order size from part a. (Round intermediate calculations and final answer to 2 decimal places. Omit the "$" sign in your response.) Total annual cost $ c. Except for rounding, are annual ordering and carrying costs always equal at the EOQ? Yes No d-1. The office manager is currently using an order size of 202 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.) TC = $
Explanation / Answer
Annual Demand = 38*261 = 9918
Holding Cost = $32
Ordering Cost = $61
a)
Order size = Sqrt((2*9918*61)/32) = 194.45 = 194 boxes
b)
Total Annual Cost = Holding Cost + ordering Cost
Holding Cost = ((EOQ / 2) * Holding Cost)
Ordering Cost = ((Annual Demand / EOQ)*Ordering Cost)
Total Annual cost = ((194/2)*32) + ((9918/194)*61) = 3104 + 3118.55 = $ 6222.55
c)
Yes, Except for rounding, are annual ordering and carrying costs always equal at the EOQ
d)
Total cost (Q = 202) = ((202/2)*32) + ((9918 / 202)*61) = 3232 + 2995.04 = $ 6227.04