Single-use surgical staplers provide a means for surgeons to close wounds or connect tissues without sutures. The cost for a high quality, circular stapler is $500 for a hospital. Typically, surgeons perform 25 surgeries per week requiring such staplers. The cost to store a stapler - reflecting both the opportunity cost as well as the storage and tracking costs - is approximately $70 per year. The administrative cost of placing orders is typically about $600.

 

a) How many staplers should they order at a time?

b) How often do they order (in weeks)?

c) What is the annual cost of holding/ordering?

d) Suppose the hospital can choose to order every 5 weeks, 10 weeks, or 15 weeks.

Assuming constant, non-random demand, which ordering interval should the hospital choose (5, 10, or 15) and what will be the annual cost of holding/ordering?