Maverick law office currently orders ink refills 60 units at a time. The firm estimtes that...

Maverick law office currently orders ink refills 60 units at a time. The firm estimtes that the ordering cost is $30, and that annual demand is about 240 units per year. The assumptions of the basic EOQ model are thought to apply. For what value of holding cost would its current order quantity be optimal? Explain clearly by showing all your work.

Solutions

Expert Solution

Order quantity = 60

Annual demand (D) = 240

Ordering cost (O) = $30

Let the holding cost be $H

Now using the formula for economic order quantity(EOQ)

Squaring both sides

Thus at a holding cost of $4, the current order quantity will become the optimal order quantity.

keosha answered 2 years ago

Next > < Previous

Related Solutions

A business currently orders 1,000 units of product ZETA at a time. It has decided that...

A business currently orders 1,000 units of product ZETA at a time. It has decided that it may be better to use the Economic Order Quantity method to establish an optimal reorder quantity. Information regarding inventories is given below: Purchase price K15 per unit Fixed cost per order K200 Holding cost 8% of the purchase price per annum Annual demand 12,000 units Current annual total inventory costs are K183,000, being the total of the purchasing, ordering and holding costs of...

The law firm of Topson Law Firm & Co., currently has four cases as of the...

The law firm of Topson Law Firm & Co., currently has four cases as of the end of October 2015: Case #1 Case #2 Case #3 Case #4 Direct Material $480 $8,800 $3,700 $850 Direct Labor ($190 per hour) 40 90 70 15 Estimated court hours 12 65 120 40 The law firm allocates overhead to cases based on a predetermined rate of $150 per estimated court hour. Required: · Determine the total costs assigned in different cases. · Assume Case #3...

The annual demand for a product is 1,000 units. The company orders 200 units each time...

The annual demand for a product is 1,000 units. The company orders 200 units each time an order is placed. The lead-time is 6 days, and the company has determined that 20 units should be held as a safety stock. There are 250 working days per year. What is the reorder point?

Let us suppose the demand at a firm is 200 units per month. The firm orders...

Let us suppose the demand at a firm is 200 units per month. The firm orders 80 units each time. How many times does the firm place an order per year? What is the average inventory level at this firm?

The firm is currently using 900 units of labor and 150 units of capital to produce...

The firm is currently using 900 units of labor and 150 units of capital to produce 200,000 units of output. At this combination the marginal product of labor is 25 and the marginal product of capital is 60. The price of labor is $50 and the price of capital is $30. a. The MP per dollar of labor is _________ and the MP per dollar of capital is _________. b. The firm can increase capital by one unit and decrease...

A firm is currently producing 100 widgets using 4 units of labor and 12 units of...

A firm is currently producing 100 widgets using 4 units of labor and 12 units of capital. The firm's production function exhibits constant returns to scale. How many units of labor and capital are needed to produce 350 widgets?

A law firm is expanding rapidly and must move to new office space. Business is good,...

A law firm is expanding rapidly and must move to new office space. Business is good, and the firm is encouraged to purchase an entire building for £10 million. The building offers first-class office space, is conveniently located near their most important corporate clients, and provides space for future expansion. The firm is considering how to pay for it. David Rooney, a consultant, encourages the firm not to buy the building but to sign a long- term lease instead. “With...

Suppose a U.S. investor wishes to invest in a British firm currently selling for £60 per...

Suppose a U.S. investor wishes to invest in a British firm currently selling for £60 per share. The investor has $6,000 to invest, and the current exchange rate is $2/£. Consider three possible prices per share at £54, £59, and £64 after 1 year. Also, consider three possible exchange rates at $1.6/£, $2/£, and $2.4/£ after 1 year. Calculate the standard deviation of both the pound- and dollar-denominated rates of return if each of the nine outcomes (three possible prices...

A firm currently produces 500 units at a price of $10. If it earns $500 profit,...

A firm currently produces 500 units at a price of $10. If it earns $500 profit, what must the average cost be? Note: The formula for Profit = Quantity × (Price − Average Cost)c

A firm is currently producing 80 units of output. At this level of output produced: its...

A firm is currently producing 80 units of output. At this level of output produced: its average total cost is 100 (ATC = 100 ) The market price per unit of output is 120 MR = 40 MC = 20 i. Is this firm making profits or losses? How much? ii. Are they maximum profits? Why? iii. If your answer to part ii was no, what does this firm have to do with maximize its profits? A firm's total cost...

Subjects