A large bakery buys flour in 25 pound bags. The bakery uses an average of 1,215

Question

A large bakery buys flour in 25 pound bags. The bakery uses an average of 1,215 bags a year Preparing an order and receving a a. Determine the economic order quantty (Round your final answer to the nearest whole number:) Economic order quantity bags b. What is the average number of bags on hand? (Round your finel answer to the nearest whole number.) Average number of bags C.How many orders per year will there be? (Round your final answer to the nearest whole number.) Number of orders per year d. Compute the total cost of ordering and carrying flour (Round your final answer to the nearest whole n ces Omit the "$" sign in your response.) Total cost s e. If holding costs were to increase by $9 per year, how much would that affect the minimum total annual cost? (Round your intermediate calculations to 2 decimal places and final answer to 2 decimal places. Omit the "$" sign in your response.) Increase by

Explanation / Answer

D (Annual Demand) = 1215 bags per annum

O (Ordering Cost) = 10 $ per order

H (Holding Cost) = 75 $ per bags

1. Economic Order Quantity

= ? (2*D*10)/H

= ? (2 * 1215 * 10)/75 = 18 Bags

2. Average Number of Bags = EOQ/2

= 18/2 = 9 Bags

3. How many orders per year there will be

= D/ EOQ = 1215/18 = 67.5

4. Total Cost

= EOQ/2 *H + D/EDQ*O

= 9*75 + 67.5 * 10

= 1350

5. If holding cost were to increase by 9 $

New EOQ = ?(2*1215*10)/84 = 17

TC = (17/2) * 84 + (1215/17) * 10

= 1428

Difference = 1428 – 1350 = 78

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