Answered

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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.

Sagot :

facundobuzzetti

Answer:

EOQ= 18

Explanation:

Economic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs.

To calculate the economic order quantity (EOQ), we need to use the following formula:

Economic order quantity (EOQ)= √[(2*D*S)/H]

D= Demand in units

S= Order cost

H= Holding cost

D= 1,215

S= $10

H= $75

Economic order quantity (EOQ)= √[(2*1,215*10)/75]

EOQ= 18

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