Question

Staples sells 300 HP printers every week (assume 52 weeks per year). Each printer costs $90 and Staples has a holding cost of 20 percent. The fixed cost for each order Staples places with HP is $500. Find the EOQ, total annual cost, number of orders per year, and the time between orders.

Answer 1

Explanation:

a. The computation of the economic order quantity is shown below:

$= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}$

$= \sqrt{\frac{2\times \text{300}\times \text{\ 500}}{\text{\ 18}}}$

= 130 units

The carrying cost is

= $90 × 20%

= $18

b. Total annual cost is

$= \sqrt{2\times300 \times\ 500 \times\ 18}$

= $2,323.79

c. The number of orders would be equal to

= Annual demand ÷ economic order quantity

= $300 ÷ 130 units

= 2.31 orders

d, The time between orders is

= 52 weeks ÷ 2.31 orders

= 22.51 weeks