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 1,200 lb, item cost is $5/lb, order cost is $40, inventory-holding cost rate (percent of item cost) is 18 percent. Use the EOQ Model Excel template in MindTap to answer the following:

a. Find the EOQ and total cost assuming no waste disposal.

b. Now assume that eight 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.

(Hint: Add to the holding cost the disposal cost times the percent of product that is disposed of.

This calculation must be done manually.)

c. What implications do these results have for sustainability practices?