Question

A small copy center uses 4 590-sheet boxes of copy paper a week. Experience suggests that usage can be well approximated by a normal distribution with a mean of 4 boxes per week and a standard deviation of .50 boxes per week. 2 weeks are required to fill an order for letterhead stationery. Ordering cost is $5, and annual holding cost is 37 cents per box. Determine the economic order quantity, assuming a 52-week year.

Answer 1

Answer: The Economic order quantity(EOQ) is 74 boxes.

Explanation:

Given weekly demand (d)= 4 boxes

Annual demand (D) = 4$\times$52 = 208 boxes

Ordering cost S = $5

Holding cost H = $0.347

Standard deviation ($\sigma$) = 0.50

Lead time (L) = 2 weeks

∴ Economic order quantity (EOQ) Q is as follow :

Q = $\sqrt{\frac{2\times D \times S}{H} }$

Q = $\sqrt{\frac{2\times 208 \times 5}{0.347} }$

Q = 77.42 or 74

The Economic order quantity(EOQ) is 74 boxes.