Need any help that can be provided -- any websites, examples, etc.

A large consulting firm orders photocopying paper by the carton. The
firm pays a $30 delivery charge on each
order. The total cost of storing the paper, including foregone
interest, storage space, and deterioration, comes
to about $1.50 per carton per month. The firm uses about 1,000 cartons
of paper per month.
						
a. Fill in the table.						
						
b. Calculate the economic order quantity. Is your answer consistent
with your feelings in part (a)?

						
				Order Size

			100	200	250	500
Total order cost
Orders per month		
Average inventory
Total carrying costs
Total inventory costs

Boobee -

This question had me thrown for a minute because I thought: "You need
to know what you're paying for the paper and that's not provided."  In
fact you don't - the paper apparently has the same cost for any size
order; only the delivery charge makes it different.

You'd want to know the paper cost only to figure carrying cost - and
that's been provided.  So it doesn't matter if the paper is $10 per
carton or $100 per carton.

However, when I went to explain the answer I realized that there’s a
2nd problem here – when do you make your inventory count?

This spreadsheet was created to take you through this problem:
"EOQ" (June 22, 2003)
http://www.mooneyevents.com/EOQ.xls

1.  fill in line 8 or "Orders per month": the company is using 1000
cartons per month, so they'll need 10 orders if they get 100 cartons
at a time; 2 orders at 500 cartons.
2. fill in line 7 or "Total order cost": $30 time each order in the
month.
3. line 9: what's the average inventory?  The company's using 33.33
cartons per day - so it makes an absolute cost difference depending on
whether your inventory count is done at the BEGINNING or END of the
day.  You’ll see two sets of assumptions here – what’s consistent is
that the difference between each method of counting will be about $50
($1.50 x 33.33 cartoons) in each method.
4.  line 10: total carrying costs = $1.50 x line 9 (average inventory)
5.	line 11: total inventory costs = line 10 + line 7 (total order
cost).

The EOQ is the point where the holding costs of $1.50/month exceed the
total order cost – which actually occurs somewhere between 100 and 200
cartoons at a time (but closer to 200).

There’s no Google search strategy for this question – simply an
application of EOQ costs.


Let me know if there’s any problem viewing the spreadsheet, as I can
post the information in another way.  Also, don’t hesitate to ask for
a clarification if any part of this answer is unclear.

Best regards,

Omnivorous-GA

Once again you have outdone yourself!!!  You explain things so very
well that I have been able to grasp each concept.  Thank you so very
much for all your help!
YOU ARE A FIVE STAR RESEARCHER......