Hospital purchasing agent Abby Smith needs to order examination gloves for the hospital. Currently, she orders 1,000 boxes of gloves whenever she thinks there is a need. Abby has heard that there is a better way to make this purchase and wants to use economic order quantity (EOQ) to determine how much to order and when to order. She collects the following information
Cost of the gloves: $4.00/box
Carrying costs: 33% or $1.33/box
Cost of ordering: $150/order
Lead time: 10 days
Annual demand: 10,000 boxes/year
1. Based on the data provided, what number of boxes of gloves should Abby be ordering? That is, what is the EOQ, the economic order quantity?
2. What is the total annual cost to the hospital of purchasing the EOQ you established in Question 1?
Please enter your response using the following format:
$X,XXX.XX [Please include the dollar sign, comma, and period]
3. Please prove the EOQ established in Question 1 is "best" by uploading three separate graphs showing the EOQ Model Cost Curves for each of the following EOQs: 1,000, 1,500, and 2,000 boxes. Use the Excel workbook provided, saving your work and uploading it here.