Homework on Supply Chain Management (Inventory)

Problem 1

A large law firm uses an average of 10 packages of copier paper a day. Each package contains 500 sheets. The firm operates 260 days a year. Storage and handling costs for the paper are $1 per year per package, and it costs approximately $10 to order and receive a shipment of papers.

1. What order quantity would minimize total annual ordering and holding cost?

1. Calculate the total annual inventory control cost using your order quantity from part a.

1. Except for rounding, are annual ordering and holding costs equal at the EOQ?

1. The office manager is currently using an order quantity of 100 packages. The partners of the firm expect the office to be managed in a cost-efficient manner. Would you recommend that the office manager use the optimal order quantity instead of 100 packages? Justify your answer.