Leilani Lavender's law office has traditionally ordered ink refills 70 units at a time. The firm estimates that carrying cost is 40% of the $9 unit cost and that annual demand is about 245 units per year. The assumptions of the basic EOQ model are thought to apply. For what value of ordering cost would its action be optimal? a) For what value of ordering cost would its action be optimal? Its action would be optimal given an ordering cost of $ per order (round your response to two decimal places). b) If the true ordering cost turns out to be much less than your answer to part (a), what is the impact on the firm's ordering policy? O A. The order quantity should be decreased. OB. The order quantity should be increased. OC. The order quantity should not be changed.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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Leilani Lavender's law office has traditionally ordered ink refills 70 units at a time. The firm estimates that carrying cost is 40% of the $9 unit cost and that annual demand is about 245 units
per year. The assumptions of the basic EOQ model are thought to apply. For what value of ordering cost would its action be optimal?
a) For what value of ordering cost would its action be optimal?
Its action would be optimal given an ordering cost of $
per order (round your response to two decimal places).
b) If the true ordering cost turns out to be much less than your answer to part (a), what is the impact on the firm's ordering policy?
A. The order quantity should be decreased.
B. The order quantity should be increased.
C. The order quantity should not be changed.
Transcribed Image Text:Leilani Lavender's law office has traditionally ordered ink refills 70 units at a time. The firm estimates that carrying cost is 40% of the $9 unit cost and that annual demand is about 245 units per year. The assumptions of the basic EOQ model are thought to apply. For what value of ordering cost would its action be optimal? a) For what value of ordering cost would its action be optimal? Its action would be optimal given an ordering cost of $ per order (round your response to two decimal places). b) If the true ordering cost turns out to be much less than your answer to part (a), what is the impact on the firm's ordering policy? A. The order quantity should be decreased. B. The order quantity should be increased. C. The order quantity should not be changed.
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