Economic order quantity; order cost; carrying cost
SoCal Co. predicts that it will use 225,000 gallons of material during the year. The material is expected to cost $10 per gallon. It anticipates that it will cost $40 to place each order. The annual carrying cost is $2 per gallon.
a. Determine the most economical order quantity by using the EOQ formula.
b. Determine the total cost of ordering and carrying at the EOQ point.
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