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    EOQ model

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    1. Our office orders 60 reams of paper at a time. The carrying cost is 40% of the $10 unit cost and that annual demand is about 240 reams per year. The assumptions of the basic EOQ model are thought to apply. For what value of ordering cost would its action be optimal?

    2. Our office is facing an ordering relating to purchasing memory sticks.

    Demand = 36000 memory sticks
    Set up cost = $25.00
    Holding cost = $0.45
    Purchase price = $0.85
    Discount price = $0.82
    Quantity needed to qualify for the discount = 6, 000 memory sticks

    Should the discount be taken?

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    Solution Summary

    Excel file shows the calculation of optimal ordering cost and optimal cost.