A large bakery buys flour in 25-pound bags. The bakery uses an average of 1215 b
ID: 2449842 • Letter: A
Question
A large bakery buys flour in 25-pound bags. The bakery uses an average of 1215 bags a year. Preparing an order and receiving a shipment of flour involves a cost of $10 per order. Annual carrying costs are $75 per bag.a. Determine the economic order quantity.
b. What is the average number of bags on hand?
c. How many orders per year will there be?
d. Compute the total cost of ordering and carrying flour
e. If holding cost were to increase by $9 per year, how much would that affect the minimum total annual cost?
This question has me lost please explain. Thanks
Explanation / Answer
A large bakery buys flour in 25-pound bags. The bakery uses an average of 1215 bags a year. Preparing an order and receiving a shipment of flour involves a cost of $10 per order. Annual carrying costs are $75 per bag.
a. Determine the economic order quantity.
an average of' 1215bags a year--------D
cost of $10 per order-----------------S
Annual carrying costs are $75 per bag.-------H
Q= SQAURE ROOT OF 2DS/H= SQAURE ROOT OF 2x 1215 x 10 /75= 18 BAGS
b. What is the average number of bags on hand?
Q/2= 18 BAGS /2= 9 BAGS
c. How many orders per year will there be?
D/Q= 1215bags /18 BAGS/ORDER=67.5 ORDERS
d. Compute the total cost of ordering and carrying flour
TC=Q/2H + D/Q X S = 18/2 x75 + 1215bags /18 X 10 = 675 +675 =13 00 DOLLARS
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