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EOQ to Minimize Annual Cost

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Georgia Pacific offers the following discount schedule for its 4X8 ft. sheets of quality plywood.

(see chart in attached file)

Ace Lumber and Building Supply regularly stocks this product from Georgia pacific and has an annual demand of 1000 sheets. The carrying cost at Ace Lumber is 20% of product cost, and a cost of $45 is incurred with each order.
a. Determine the optimal order quantity for Ace Lumber.

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Solution Summary

This solution contains the optimal order quantity calculation to minimize ordering cost, inventory carrying cost and quantity discount schedule.

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Hello

** Please see the attached file for the complete solution response **

Please see the word document and the Excel sheet for all the details. In the Excel sheet you can see all the formulas in action. You can use this Excel sheet for any other quantity discount problem or perform sensitivity analysis within the current problem.

Georgia Pacific offers the following discount schedule for its 4X8 ft. sheets of quality plywood.
Order Unit Cost ($)
Less than 100 sheets 18.00
100 to 499 sheets 17.50
500 to 750 sheets 17.25
More than 750 ...

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