Question

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. what is the economic order quantity for resin?

Answer 1

Answer:

EOQ is 500kg

Explanation:

In this question, we are asked to calculate the economic order quantity for resin.

To calculate the economic order quantity, we employ the use of a mathematical formula.

Mathematically;

EOQ = √2DS/H

where D is annual demand = 365 * 50 = 18,250

S = order costs = 100

H = Annual holding cost = 365 * 0.04 = 14.6

Plugging these values into the equation, we have;

EOQ = √(2 * 18,250 * 100)/14.6 = √250,000

EOQ = 500kg

Answer 2

Answer: 500kg

Explanation:

GIVEN the following

Daily usage = 50kg

Holding cost = $0.04 per day(in dollar)

Order cost = $100 per order

Applying the ECONOMIC ORDER QUANTITY FORMULA(EOQ) :

EOQ = sqrt[ ( 2 × A × O) ÷ H ]

Where :

A = Annual material used = 50 × 365(1 year) = 18,250

O = Cost of order = $100

H = Holding cost = $14.6

THEREFORE ;

EOQ = sqrt[ (2 × 18,250 × $100) ÷ $14.6]

EOQ = sqrt[ $3,650,000 ÷ $14.6]

EOQ = sqrt( 250,000)

EOQ = 500kg