QUESTIONS

1. The current order quantity for Paul’s Pasta Pin- wheels is 200 boxes. The order cost is $4 per or- der, the holding cost is $0.40 per box per year, and the annual demand is 500 boxes per year.

a. Calculate the annual holding cost plus the annual ordering cost to get the total annual cost when using an order quantity of 200 boxes.

b. Calculate the EOQ and the total annual cost for this order quantity.

3. Hottenstein, Giffith, and Hult, attorneys at law, do a great deal of printing. The firm uses a single type of printer with annual demand for print cartridges of 480 per year. The order cost is $15 per order, and the carrying cost is 20 percent per cartridge per year of the purchase cost of $35 per cartridge.

a. How many print cartridges should the firm order at one time?

b. What is the time between orders?

4. Burgerama requires all employees who handle food to wear latex gloves for sanitary reasons. The annual demand for gloves is 250 boxes of 200 per year. The order cost is $11 per order, and the carrying cost is 25 percent per box per year of the purchase cost of $20 per box.

a. How many boxes of gloves should Burgerama order at one time?

b. What is the time between orders?

c. What would be the change in annual cost if Burgerama had storage space for only 15 boxes per order and thus was forced to use an order quantity of 15?

5. Office Express sells office suppliers to businesses on a membership basis—i.e., walk-in customers without a membership are not allowed. The company delivers supplies directly to the purchaser as long as a minimum purchase of $100 is made. In order to encourage bulk orders, Office Express offers the following discount schedule on purchase quantities of boxes of paper. Larry’s Lumber has annual demand of 5,000 boxes of paper, a setup cost of $10 per order, and a holding cost of 22 percent of the purchase price. Calculate the optimal order quantity.

1–100 boxes $5 per box

100–249 boxes $4.75 per box

250–499 boxes $4.50 per box

500 or more boxes $4.25 per box

6. A watch repair shop buys batteries for a variety of products. The most frequent battery purchase is for a Y300, with demand of 3,000 per year. The order cost is $15 per order, and the holding cost is $0.50 per battery. Given the following price schedule, calculate the optimal order quantity.

Number of Batteries Price

1–250 $6.00

250–499 $5.50

500–999 $5.00

1,000 or more $4.75

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