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 receiving a shipment of flour involves a cost of $10 per order. Annual carrying costs are $75 per bag. a. Determine the economic order quantity. (Round your final answer to the nearest whole number.) Economic order quantity bags b. What is the average number of bags on hand? (Round your final answer to the nearest whole number.) Average number of bags c. How many orders per year will there be? (Round your final answer to the nearest whole number.) Number of orders per year d. Compute the total cost of ordering and carrying flour. (Round your final answer to the nearest whole number. Omit the "$" sign in your response.) Total cost$ 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

Data Given

Annual Demand (D) = 1215 bags

Ordering Cost (S) = $10

Holding Cost (H)= $75

A - So EOQ = (2DS)/H

= (2*1215*10)/75

So Q= 18units

B-Average Inventory = Q/2 = 18/2 =9 units.

C- No of orders in a year = D/Q= 1215/18=67.5=68 orders.

D Total Cost = Annual ordering Cost + Annual holding cost

= (D/Q)*S+(Q/2)*H

=(1215/18)*10 + (18/2)*75

675+675

$1350

E- New Holding Cost = 75+9=$84

New EOQ= (2DS/H) = (2*1215*10/84) = 17 units.

So new cost =

(D/Q)*S +(Q/2)*H

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

714.70+714

$1428.70

Pl comment in case of any concern.

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