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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. (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.)

Sagot :

Answers:

a) Economic order quantity bags = 18 bags

b) Average number of bags = 9 bags

c) Number of orders per year = 67.5 orders

d) Total cost of ordering and carrying flour = $675

Economic order quantity

The Economic Order Quantity is used to artificially inflate the order's expenses, which include both fixed and variable costs. These expenses include the expenditures of purchasing from the provider, ordering, and transferring.

Explanation:

a) To find the economic order quantity of bags:

Given,

Annual Demand(x) = 1215 bags

Ordering Costs(y) = $10 per order

Annual carrying costs(z) = $75 per bag

Applying formula:

Economic order quantity = √((2 x Y x X) / Z)

                                          = √((2 x 10 x 1215) / 75)

                                           = 18

b) To find the average number of bags:

                       Economic order quantity   =   [tex]\frac{18}{2}[/tex]

                                         2

                                                                     = 9

c) To find the number of orders per year = Actual Demand              

                                                                      Economic Order Quantity

                                                                      = [tex]\frac{1215}{18}[/tex]

                                                                      = 67.5

d) Compute the total cost of ordering and carrying flour

= Total number of orders per year x Ordering cost

= 9 x 75

=675

To learn more about economic order quantity visit here:

brainly.com/question/16986815

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