Boundless Paper is an online retail outlet for high end paper products. The comp

Question

Boundless Paper is an online retail outlet for high end paper products. The company orders name brand paper products at wholesale and sells to the public at retail. The management at Boundless Paper is trying to determine the optimal order quantity for a particular brand of paper. The paper wholesales at $100.00 per ream (500 sheets) and sells for $0.50 per sheet ($250.00 per ream). Order costs are estimated at $50 per order and holding costs are $.50 per ream. Boundless Paper sells about 1 million sheets of paper per year (2,000 reams).

A. Assuming that 120 reams are ordered each time an order is placed, estimate the annual inventory costs.
B. Determine the EQO?
C. Based on the EQO, how many orders should be placed and what is the average inventory balance?
D. If it takes five days to receive an order from the suppliers, at what inventory level should Boundless place an order?
E. The supplier of this particular paper product has recently offered a discount of $5.00/ream for order increments of 100 reams (50,000 sheets) for a maximum order of 500 reams. What quantity should Boundless order based on the quantity discount offered?

Explanation / Answer

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