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Problem 12. I also need your assistance in calculating the following EOQ [economic order quantity] given new data for 2024. Our inventory generally follows Pareto’s Law; therefore, I have emphasized controlling those items representing the majority of our inventory activity. One of those items is IV [intravenous] setups. Our current situation is as follows: 2023 price = $60 2023 projected demand = 60,000 2023 ordering cost = $25 2023 interest = 6.25% 2023 holding cost = $.50 The IV distributor would like to distribute a new model setup in 2024 at the same price but is willing to reduce our carrying costs by making equal monthly deliveries. After discussing the proposal with the Ms. Sabin, I discovered that in-service training will be required for the new model. I believe that each RN [registered nurse] will be required to attend a two-hour seminar. I’m not quite sure where to put this training cost in the EOQ formula. Ms. Sabin also tells me that there are significant quality advantages with the new model, and she thinks we should order and stock the new model. What do you think? If we lose money on the new model, what price can we negotiate with the IV distributor to cover our loss? [See chapter 12.]
Nowicki, Michael. Introduction to the Financial Management of Healthcare Organizations, Ninth Edition (pp. 510-511). Health Administration Press.
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