5. A large bakery buys flour in 25 kg bags. The bakery uses an average of 4,860 bags a year. Preparing an order, receivi

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5 A Large Bakery Buys Flour In 25 Kg Bags The Bakery Uses An Average Of 4 860 Bags A Year Preparing An Order Receivi 1 (153.99 KiB) Viewed 11 times

5. A large bakery buys flour in 25 kg bags. The bakery uses an average of 4,860 bags a year. Preparing an order, receiving the shipment, and paying the invoice costs $10 per order. Annual holding cost is $5 per flour bag. a. Determine the economic order quantity. b. What is the average number of bags on hand (i.e., average cycle inventory) if EOQ is used? c. How many orders per year will there be if EOQ is used? d. Calculate the total annual cost of ordering and holding flour for EOQ. e. If ordering cost were to increase by 50 percent per order, by what percentage would the EOQ change? 7. A flower shop uses 250 clay pots a month. The pots are purchased for $2 each. Annual holding cost is estimated to be 30 percent of purchase cost, and ordering cost is $20 per order. The manager has been using an order quantity of 250 flower pots. a. Calculate the EOQ. b. Calculate the EOQ's total annual inventory control cost. c. What additional annual inventory control cost is the shop incurring by using the current order quantity? 9. Demand for an item is projected to be 100 units per month. The monthly holding cost is $2 per unit, and it costs $55 to process an order. a. Determine the EOQ. b. If the vendor is willing to offer the manager a discount of $10 per order for ordering in multiples of 50 units (e.g., 50, 100), would you advise the manager to take advantage of the offer? If so, what order quantity would you recommend? c. Alternatively, if the demand can wait at the cost of $5 per unit per month, what should the order quantity and the amount short per order cycle be? 10. A food processor uses approximately 27,000 glass jars a month. Because of storage limitations, a lot size of 4,000 jars has been used. Monthly holding cost is $0.01 per jar, and ordering cost is $20 per order. a. What penalty is the company incurring by using its present order quantity? b. The manager would like to justify the present order quantity. One possibility is to simplify order processing to reduce the ordering cost. What ordering cost would enable the manager to justify the current order quantity? 11. A sausage factory can produce European wieners at a rate of 500 kg per day. It supplies wieners to local stores and restaurants at a steady rate of 100 kg per day. The cost to prepare the equipment for producing European wieners is $12. Annual holding cost is $4/kg of wieners. The factory operates 300 days a year. Calculate: a. The optimal production run quantity. b. The number of production runs per year. c. The length (in days) of a production run.