Solve the problem.
-A local office supply store has an annual demand for 50,000 cases of photocopier paper per year. It costs $1 per year to store a case of photocopier paper, and it costs $50 to place an order. Find the optimum number of cases
Of photocopier paper per order.
A) 1,581 cases
B) 5,000,000 cases
C) 2,236 cases
D) 707 cases

Question

Quizplus · Accepted Answer

The economic order quantity (EOQ) formula can be used to find the optimum number of cases of photocopier paper per order:

EOQ = sqrt((2DS)/H)

where D = annual demand, S = cost to place an order, and H = cost to hold a unit in inventory for a year.

Plugging in the values given in the problem:

EOQ = sqrt((2*50,000*50)/1) = 2,236

Therefore, the optimum number of cases of photocopier paper per order is 2,236.

Choice C matches this calculated value, so it is the best choice. To find the optimum number of cases of photocopier paper per order, we can use the Economic Order Quantity (EOQ) formula:

EOQ = sqrt((2DS)/H)

where:
D = annual demand (50,000 cases per year)
S = setup cost per order ($50)
H = holding cost per unit per year ($1)

Plugging in the values, we get:

EOQ = sqrt((2 x 50,000 x 50)/1)
EOQ = sqrt(5,000,000)
EOQ ≈ 2,236

Therefore, the optimum number of cases of photocopier paper per order is 2,236 cases. This minimizes the total cost of ordering and holding inventory. Choice C) is the correct answer.

Solve the Problem. -A Local Office Supply Store Has an Annual Demand for Annual