How much is the total inventory holding and ordering cost

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Reference no: EM132301672

A provincial government uses massive quantities of computer printer paper, which it buys centrally. The purchasing department calculates an economic order quantity based on an assumed carrying rate of 30% per year. A box of printer paper costs $40, it costs $60 to process an order, and an annual demand is for 36000 boxes of paper.

a) What is the economic order quantity? How much is the total inventory holding and ordering cost?

b) The buyer wishes to determine how sensitive the sum of inventory and ordering costs are to the order quantity. Determine how the costs would change if the order quantity is 50% more than EOQ and 50% less than the EOQ quantity.

Reference no: EM132301672

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