(Economic Order Quantity) Houston Publishing purchases paper by the ream for the production of textbooks for colleges and universities. One ream of paper is equivalent to approximately 500 pages of paper. The publisher normally purchases 4,000 reams of paper a year. The paper is ordered in quantities of 400 reams, approximately 10 times per year. The carrying cost of one ream of paper is $5, while the ordering cost is $35 per order. What is the economic order quantity of reams of paper? What are the overall cost savings if the company changes from an order size of 400 reams to the economic order size?
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