An office supply company is attempting to determine the order quantity for laser printer toner cartridges which are sold to local businesses. Annual demand is 20,000 units and each cartridge costs the store $25. It costs $30 to place an order and the inventory carrying cost rate is 25% of the value of the item. The following spreadsheet has been set up to solve the problem. What formula goes in cell B11 in this problem?
A)=B3*B7+B9/B3*B6+B9*2+B5*B7
B)=B3*B5+B3/B9*B6+B9/2*B5*B7
C)=SQRT(B3*B5+B3/B9*B6+B9/2*B5*B7)
D)=B3*B3+B3/B9+B6*B9/2*B5*B7

Question

An office supply company is attempting to determine the order quantity for laser printer toner cartridges which are sold to local businesses. Annual demand is 20,000 units and each cartridge costs the store $25. It costs $30 to place an order and the inventory carrying cost rate is 25% of the value of the item. The following spreadsheet has been set up to solve the problem. What formula goes in cell B11 in this problem? 
A)=B3*B7+B9/B3*B6+B9*2+B5*B7 
B)=B3*B5+B3/B9*B6+B9/2*B5*B7 
C)=SQRT(B3*B5+B3/B9*B6+B9/2*B5*B7) 
D)=B3*B3+B3/B9+B6*B9/2*B5*B7

Quizplus · Accepted Answer

The formula in cell B11 calculates the Economic Order Quantity (EOQ) and is given by: 
EOQ = sqrt((2 * Annual Demand * Ordering Cost)/Carrying Cost per Unit)
Substituting the given values: 
EOQ = sqrt((2 * 20000 * $30)/($25 * 0.25)) = 489.9
Rounding up to the nearest whole number, the EOQ is 490. 
Therefore, the formula in cell B11 should be: 
=ROUNDUP(SQRT((2*B3*B9)/B5),0)

An Office Supply Company Is Attempting to Determine the Order