The Samburu hospital purchases 200,000 reams of copy paper each year at a price of $ 2.5
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The Samburu hospital purchases 200,000 reams of copy paper each year at a price of $ 2.5 per ream.
Samburu cost of carrying inventory is 6% per annum. Other costs related to storage come to $0.5 per ream of paper per year. Each order requires $30 of clerical time and $135 shipping costs.
a) What is the economic order quantity?
b)If the vendor will only deliver in multiple of 1000 reams of paper, how many reams should you order each time to have minimum inventory cost. Support your answer?
c) Suppose the vendor offers a discount of 0.05% if it orders 25,000 reams a time . Should Samburu hospital accept the offer? Why or why not
Expert Answer:
Annual Requirements R 200000 reams Cost Per Unit P 25 Cost of Carrying Ch 25 x 006 05 065 Cost of Pl... View the full answer
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