Essentials Of Cost Accounting For Health Care Organizations 3rd Edition by Steven Finkler, David Ward,Judith Baker

Exercise 5

An Economic Order Quantity Problem. The E.O. Queue Hospital is trying to determine how many bedpans to buy at a time. They use approximately 2,000 per year. Each bedpan costs the hospital $4. The hospital calculates their capital cost at a rate of 10 percent of the purchase price. Additional carrying costs are 60$ per unit. Every time the hospital places an order for bedpans, the labor cost in the purchasing department is $16, the shipping and handling cost for the order is $20, and other costs related to making an order are $4. a) What is the economic order quantity? b) Suppose that they could get a 10(2 discount per bedpan if they order at least 1,000 at a time. Should they take advantage of this discount? Excel® Problem