Answer:

Economic order quantity (EOQ) helps to minimize total inventory costs and total ordering costs of a firm. It provides customized recommendations of the quantity of inventory needed and when to order the inventory in terms of units per order.

There are several valid assumptions for a simple EOQ model as illustrated below:

•The required quantity of inventory of a period must be assumed to calculate EOQ.

•The quantities used to compute EOQ must be assumed to be constant for a given period of time.

•One other valid assumption to calculate simple EOQ is to consider marginal costs and to omit fixed costs.

•A valid assumption of a classic EOQ model also assumes to maintain constant demand rates with no stockouts. This is valid for dairy firms.

Using EOQ, a firm can obtain customer satisfaction through maintaining enough inventory.

Answer:

(a)

(b)

(c)

Answer:

Company BO has a recurring issue to clear its shelves once its publisher releases new editions.

a)

Compute the lowest discount price as shown below:

Formula to calculate the lowest discount price as shown below:

….. (1)

Here,

The available data to solve the problem is as shown below:

Now, calculate the lowest discount price as shown below:

Substitute the values in equation (1) as shown below:

Hence, the lowest discount price is

b)

From the above calculations, it can be observed that the discount price is not influenced by number of hardcovers. This is because, the hard bags in stock were cancelled out in the calculation.