An office supply company is attempting to determine the order quantity for laser printer toner cartridges which are sold to local businesses. Annual demand is 20,000 units and each cartridge costs the store $25. It costs $30 to place an order and the inventory carrying cost rate is 25% of the value of the item. The following spreadsheet has been set up to solve the problem. What formula goes in cell B11 in this problem?
A) =B3*B7+B9/B3*B6+B9*2+B5*B7
B) =B3*B5+B3/B9*B6+B9/2*B5*B7
C) =SQRT(B3*B5+B3/B9*B6+B9/2*B5*B7)
D) =B3*B3+B3/B9+B6*B9/2*B5*B7

Question

An office supply company is attempting to determine the order quantity for laser printer toner cartridges which are sold to local businesses. Annual demand is 20,000 units and each cartridge costs the store $25. It costs $30 to place an order and the inventory carrying cost rate is 25% of the value of the item. The following spreadsheet has been set up to solve the problem. What formula goes in cell B11 in this problem? 
A) =B3*B7+B9/B3*B6+B9*2+B5*B7 
B) =B3*B5+B3/B9*B6+B9/2*B5*B7 
C) =SQRT(B3*B5+B3/B9*B6+B9/2*B5*B7) 
D) =B3*B3+B3/B9+B6*B9/2*B5*B7

Quizplus · Accepted Answer

Cell B11 in the spreadsheet should contain the Economic Order Quantity (EOQ) formula, which is:
EOQ = sqrt((2DS)/H)
where D = annual demand, S = setup or ordering cost, and H = holding or inventory carrying cost rate. 
Thus, the formula for cell B11 in this problem should be:
=SQRT((2*B3*B5)/B9) + or - this term multiplied by the root of:
(B3*B7)+(B9/B3*B6)+(B9*2)+(B5*B7)

An Office Supply Company Is Attempting to Determine the Order