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 hold 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?
A)50 kilograms
B)100 kilograms
C)250 kilograms
D)500 kilograms
E)1,000 kilograms

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is used to minimize the total holding costs and ordering costs. The formula is: EOQ = sqrt((2DS)/H), where D is the demand rate (50 kg/day * 365 days), S is the order cost ($100), and H is the holding cost per unit per year ($0.04 * 365). Calculating this gives approximately 500 kilograms.

The Materials Manager for a Billiard Ball Maker Must Periodically