Q2 A school orders boxes of board markers 10 markers to a bo

Q2 A school orders boxes of board markers (10 markers to a box). The per-box price depends on the number of boxes purchased. The school uses 10000 markers per year and the cost of placing an order is assumed to be 100TL. The only holding cost is the opportunity cost of capital, which is assumed to be 20% per year. # of Boxes Ordered 0 q

Solution

The optimal order size = SqRt[ (2 * D_d * O_c) / H_c ]

putting in the values in the formula :

The optimal order size = SqRt[ (2 * 10000 * 100) / (48.50 * 20%) ]

=  SqRt[ 2000000 / 9.70 ]

= 454 boxes

The average time between the orders = 365 / (10000 / 454) = 365 / 22.03 = 16.57 days