Crosson Corporation
Crosson Corporation operates its factory 300 days per year.Its annual consumption of Material Y is 1,200,000 gallons.It carries a 10,000 gallon safety stock of Material Y and its lead time is 12 business days.
Refer to Crosson Corporation.If the EOQ for Material Y is 30,000 gallons,and the carrying cost per gallon per year is $.25,what is the total annual carrying cost for Material Y?

Question

Quizplus · Accepted Answer

To calculate the carrying cost, we first need to determine the total inventory carrying cost for the year.

Total Inventory carrying cost = (EOQ/2) x carrying cost per gallon
EOQ = 30,000 gallons
carrying cost per gallon = $0.25

Total inventory carrying cost = (30,000 / 2) x 0.25 = $3,750

Therefore, the total annual carrying cost for Material Y is $3,750. 
Option C is the correct choice.

Crosson Corporation Crosson Corporation Operates Its Factory 300 Days Per Year.Its Annual