Dazzle Graphics uses a special purpose paper on 80% of its jobs.The paper is purchased in 100- sheet packages at a cost of $100 per package.Management estimates that the cost of placing and receiving a typical order is $15, and the annual cost of carrying a package in inventory is $1.50. Dazzle uses 2,600 packages each year.Production is constant, and the lead time to receive an order is one week. The economic order quantity is approximately:

Question

Quizplus · Accepted Answer

To solve for the economic order quantity, we can use the following formula:

EOQ = sqrt((2DS)/H)

Where
D = annual demand = 2,600 packages
S = cost per order = $15
H = annual carrying cost per package = $1.50
sqrt = square root

Plugging in the values:

EOQ = sqrt((2 x 2,600 x 15)/1.50)
EOQ = sqrt(78,000)
EOQ = 279.69 ≈ 228 (rounded to the nearest whole number)

Therefore, the economic order quantity is approximately 228 packages.

Dazzle Graphics Uses a Special Purpose Paper on 80% of Its