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Vilas County Hospital consumed 400 boxes of bandages per week last year. The price of bandages was $80 per box, and the hospital operates 52 weeks per year. The cost of processing an order was $64, and the cost of holding one box throughout a full year was 20% of the value of the material. Last year the hospital ordered bandages, on average, once every two weeks, each time ordering 800 boxes. What extra cost did the hospital incur that could have been avoided if the EOQ concept had been applied?

Sagot :

Tundexiidn

More than $1,450 is the extra cost incured which would have been avoided if the EOQ concept had been applied.

What is an Economic order quantity?

This is a technique in inventory management that helps to make an efficient management decision

The formula for EOQ is  (2AO / H)^(1/2) where A (400 x 52) = 20,800, O = $64 and H (80 x 20%) = 16

EOQ = (2*20800*64)^(1/2)

EOQ = 1631.68624435

EOQ = $1631.67

Therefore, the Option D is correct.

Missing options "A) less than or equal to $650 B) more than $650 and less than $1,050 C) more than $1,050 and less than $1,450 D) more than $1,450"

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