Solved Problem 2

A hospital buys disposable surgical packages from Pfisher, Inc. Pfisher’s price schedule is $50.25 per package on orders of 1 to 199 packages and $49.00 per package on orders of 200 or more packages. Ordering cost is $64 per order, and annual holding cost is 20 percent of the per-unit purchase price. Annual demand is 490 packages. What is the best purchase quantity?

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We first calculate the EOQ at the lowest price:

EOQ49.00=2DSH=2(490)($64.00)0.20($49.00)=6,400=80 packages

This solution is infeasible because, according to the price schedule, we cannot purchase 80 packages at a price of $49.00 each. Therefore, we calculate the EOQ at the next lowest price ($50.25):


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