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Problem - Meals for the Homeless buys 30,000 large cans of green beans each year. The cost of each can of beans is $4. The cost to place an order for beans, including the time of the employee placing the order, shipping, and so forth, comes to $20 per order. The out-of-pocket carrying costs (for storage, etc.) are $0.30 per can per year. In addition, Meals calculates its interest at 5 percent.
Required -
How many cans should be ordered at a time? How many orders should there be each year?
What are the total ordering costs and carrying costs at the EOQ?
Contrast the total of the ordering costs and carrying costs at EOQ to the total ordering and carrying costs if the cans were all ordered at the beginning of the year.
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