Your family\'s house painting business has decided to try this \"EOQ thing\" you

Question

Your family's house painting business has decided to try this "EOQ thing" you just learned in SCMS 3510. So you open the financials and note the following information:

Three-year average paint consumption: 3130 gallons per year

You use a small warehouse to hold your equipment and paint. From your cost accounting class, you estimate that your holding cost per gallon of paint is $2.30 per year.

Buying the materials needed requires more time than you thought. The part-time person whose only function is to do all of your buying says that she processes 1690 purchase orders per year and her average pay has been $17045 per year.

What is the EOQ for paint in gallons? (Your answer should be in whole gallons)

Explanation / Answer

Demand (D) = 3130

Holding cost (H) = 2.3

Ordering cost (S) = Total purchasing cost/Number of purchases = 17045/1690 = 10.09

EOQ = sqrt(2*D*S/H) = sqrt(2*3130*10.09/2.3) = 166

Ans - 166

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