EOQ Verijon, Inc., uses 15,000 pounds of plastic each year in its prod

QUESTION

EOQ
Verijon, Inc., uses 15,000 pounds of plastic each year in its production of plastic cups. The cost of placing an order is $10. The cost of holding one pound of plastic for one year is $0.30. Verijon uses an average of 60 pounds of plastic per day. It takes five days to place and receive an order.
Required:
1. Calculate the EOQ.
2. Calculate the annual ordering and carrying costs for the EOQ.
3. What is the reorder point?
1. EOQ = (2*15000*10/.30)^.5 = 1000 pounds 2. Annual ordering cost = 15000/1000*10 = $150 Annual¦

rying cost = 1000/2*.3 = $150 3. Reorder point = 5*60 = 300 pounds

ANSWER:

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