Jovan Corporation has developed a new type of industrial detergent. Sales are expected to be 78,000 gallons per year. The manager wishes to keep a safety stock of 2 weeks normal usage based on a 52-week year. Carrying costs are $4 per gallon; it costs $12 to place an order.

Assume a five-day work week.

Required:

a. Determine the safety stock quantity the manager wishes to maintain.

b. Calculate the EOQ.

c. Identify the number of orders needed per year based on the EOQ you determined in Requirement b.

d. Using the EOQ you determined in Requirement

b, calculate the annual ordering costs.