Question: (EOQ calculations) A downtown bookstore is trying to determine the optimal order quantity for a popular novel just printed in paperback. The store feels that the book will sell at four times its hardback figures. It would, therefore, sell approximately 3,000 copies in the next year at a price of $1.50. The store buys the book at a wholesale figure of $1. Costs for carrying the book are estimated at $0.10 a copy per year, and it costs $10 to order more books.
a. Determine the EOQ.
b What would be the total costs for ordering the books 1, 4, 5, 10, and 15 times a year?
c. What questionable assumptions are being made by the EOQ model?