Use the information below to answer the following question(s):
The materials manager for a billiard ball maker must periodically place orders for resin,one of the raw materials used in producing billiard balls.She knows that manufacturing uses resin at a rate of 50 kilograms each day,and that it costs $.04 per day to carry a kilogram of resin in inventory.She also knows that the order costs for resin are $100 per order,and that the lead time for delivery is four (4)days.Assume 365 days in a year.
-What is the economic order quantity (EOQ)for resin?
A)50 kilograms
B)100 kilograms
C)200 kilograms
D)500 kilograms

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where $D$ is the annual demand, $S$ is the ordering cost per order, and $H$ is the holding cost per unit per year. Here, $D = 50 \times 365 = 18,250$ kilograms/year, $S = $100$, and $H = $0.04 \times 365 = $14.60$/kilogram/year. Plugging these values into the EOQ formula gives $\sqrt{\frac{2 \times 18,250 \times 100}{14.60}} \approx 500$ kilograms.

Use the Information Below to Answer the Following Question(s)