Q= sqrt (2CD/H)
Q=sqrt(2*12*816/4)=70
Notice that optimal order quanitity is independent of purchase price.
Total Cost: http://en.wikipedia.org/wiki/Economic_order_quantity
The maintenance department of a hospital uses 816 cases of liquid cleanser annually. Ordering costs are $12, carrying costs are $4 per case a year, and the new price schedule indicates that orders of less than 50 cases will cost $20 per case, 50 to 79 cases will cost $18 per case, 80 to 99 cases will cost $17 per case and larger orders will cost $16 per case. Determine the total optimal order quantity and the total cost.
I know these are the steps, but I am completely lost when I am trying to do this problem for my study guide, If someone can point me in the right direction or breakdown the steps with the numbers above that would be great:
Step 1: Compute the EOQ.
Step 2: From the quantity ranges for each price, identify the feasible range for the EOQ.
Step 2A: If min point is in the lowest price range, EOQ = min point.
Step 2B: If not, compute the total cost (including purchasing) for the min. point, and for the price break qty for all lower unit costs (higher discount ranges). Compare the total costs; the quantity that yields the lowest total cost is the optimal order quantity.
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