Illustrate what are total costs of inventory

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Reference no: EM1376621

Q. This problem is a practice for test next week. I have all formulas but I am not sure elucidating how to use it.

A large law firm uses an average of 40 packages of copier paper a day. Firm operates 260 days a year. Storage also Handling costs for paper are $3 per year per pack also it costs approximately $6 to order also receive a shipment of paper.

a. Illustrate what order size would minimize total inventory costs?

b. Illustrate what are total costs of inventory?

c. Office manager is presently using an order size of 200 packages. Partners of firm expect office to be managed in a "cost effective manner". Would you recommend which optimal order size or current policy of 200 packages is used? Explain quantitatively.

Reference no: EM1376621

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