MULTIPLE CHOICE. 20 points each Choose the one alternative that best completes t
ID: 382870 • Letter: M
Question
MULTIPLE CHOICE. 20 points each Choose the one alternative that best completes the statement or answers the question 16) Bakery A uses 60 bags of flour each month. The flour is purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Bakery A's annual inventory holding cost percentage is 40%. If Bakery A chooses to use the economic order quantity for four purchases, what will be the total of its holding and ordering costs per year? A) $277 B) $960 C)$138 D) $480 17) Bakery A uses 60 bags of flour each month. The flour is purchased from a supplier for a price of $80 per bag and an ordering cost of $20 per order. Bakery A's annual inventory holding cost percentage is 40%. If Bakery A chooses to use the economic order quantity for flour purchases, how many orders will be placed with the supplier each year? A) 15 B)7 C)24 D) 30
Explanation / Answer
ANSWER:
16) Answer is Option (B) - $960.
The Total order per year for economic ordering is 30 nos & order cost is $20/order as detailed below, so total ordering cost is $600 and hence the total of its holding and ordering cost is $960.
17) Answer is Option (D) - 30 Order
Total Flour bags required per year = 60 bags/ month x12 = 720 bags,
Economic Order Quantity (E.O.Q) is derived by the equation, Square root (2SD/PI).
where, S - Setup cost, D- Demand rate, P- Production cost, I - Interest rate.
In our scenario, E.O.Q = Square root {(2 * 60*12 *20) / 32} = Square root (900) = 30 orders
where, 2 - constant
60 - bags per month
12 - number of month in a year
20- ordering cost per order
32 - (720bags*$80*40%) / 720 bags
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.