A pipe manufacturer requires a chemical for making plastic at the rate of 6,000 gallons per year. The cost of keeping the chemical storage includes both the cost of the special security precautions in the storage space and borrowing money on short-term loans to pay for the purchase; this works out to about $10 per gallon per year. Ordering costs, which include cost of special transportation, work out to $200 per order. The chemical is bought at $45 per gallon. What is the EOQ and annual total cost?

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
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 A pipe manufacturer requires a chemical for making plastic at the rate of 6,000 gallons per year. The cost of keeping the chemical storage includes both the cost of the special security precautions in the storage space and borrowing money on short-term loans to pay for the purchase; this works out to about $10 per gallon per year. Ordering costs, which include cost of special transportation, work out to $200 per order. The chemical is bought at $45 per gallon. What is the EOQ and annual total cost?

 

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