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.

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

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