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Paper Company Inventory Management and Economic Order Quantity (EOQ)

A paper company uses approximately 1000 cartons of paper a month. The company charges $30 delivery charge per order. The company charges $1.50 per carton per month to cover storage, deteriation etc... Please see part 1 and 2. The instructions were to fill out the table.

Part 1.

Order size 100 200 250 500

Order per month 10 5 4 2

Total order cost 300 150 120 60

Average inventory ? ? ? ?

Total carrying Costs ? ? ? ?

Total inventory costs ? ? ? ?

Part 2. Calculate the economic order quantity?

Solution Preview

I have attached the solution to your table as well as an explanation of economic order quantity.

A paper company uses approximately 1000 cartons of paper a month. The company charges $30 delivery charge per order. The company charges $1.50 per carton per month to cover storage, deterioration etc... Please see part 1 and 2. The instructions were to fill out the table.

Part 1.

Order size 100 200 250 500

Order per month 10 5 4 2

Total order cost 300 150 120 60

Average inventory ? ? ? ?

In the case of 10 orders per month the average inventory will be smaller than the case of 2 orders per month. So how many boxes are on hand per month given the order quantities and frequencies?

Lets say the month is divided into ten segments and we have a 30 day month then there are three days per ...

Solution Summary

The solution carefully explains how to compute each missing amount in the table, plus the calculation for EOQ.

$2.19