Environmental considerations, material losses, and waste disposal can be included in the EOQ model to improve inventory management decisions. Assume that the annual demand for an industrial chemical is 1,200lb, item cost is $5/lb, order cost is $40, inventory-holding cost rate (percent of item cost) is 18 percent.
a. Find the EOQ and total cost assuming no waste disposal.
b. Now assume that8 percent of the chemical is not used and disposed of, with a disposal cost of $0.75/lb. Find the EOQ and total cost when disposal costs are incorporated into the model.
c. What implications do these results have for sustainability practices?