Business Problems/Week5 Team Assignment

Part A.

A small hospital purchases units of red blood from a local blood collection agency. The hospital uses 2,000 units monthly and pays $236.72 per unit. The cost per order

is $197.00. The cost of capital is 11% and the handling, insurance, and spoilage costs are 8% of the item cost.

1. Determine the EOQ and the total annual inventory holding cost.

2. The blood collection agency provides a $2,000 rebate/year for customers that order a

minimum of 1,000 units for each order. Determine how much the hospital would save or

lose each year if it followed the suppliers offer.