Answered

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4. The Peace Care Hospital uses 3500 boxes of sterile bandages each month. The annual carrying cost is $ 2·90 per box per year. The ordering cost is $25 each time an order is placed, regardless of the order quantity. The hospital operates 365 days per year. Peace Care Hospital would like to use the EOQ model.
i) How many boxes of sterile bandages should be ordered each time an order is placed using the EOQ ?
ii) ii) How many orders per year are expected using the EOQ order ?
iii) iii) Suppose that currently the manager uses an order size of 900 boxes. What additional cost is the hospital incurring by using this current order size rather than the EOQ ?
[ Hint : compare the cost of using the EOQ amount versus the cost incurred using an order size of 900 boxes. ]

Sagot :

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