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?
a. $3,750
b. $7,500
c. $6,250
d. $10,000
C
Annual carrying cost = [(EOQ/2) + Safety stock] * per unit carrying cost
= (15,000 + 10,000) * $0.25
= $6,250
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