BA 6025 Homework Q1 - Production and Operations Management PDF

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Production and Operations Management...

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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

18

bags

b. What is the average number of bags on hand? (Round your final answer to the nearest whole number.) Average number of bags

9

c. How many orders per year will there be? (Round your final answer to the nearest whole number.) Number of orders per year

68

d. Compute the total cost of ordering and carrying flour. (Round your final answer to the nearest whole number.) Total cost

$

1,350

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e. If annual holding costs were to increase by $9 per bag, 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.) Increase by

$

78.71

References Worksheet

Difficulty: 2 Medium

Problem 12-3 (Static)

Learning Objective: 12-08 Describe the basic EOQ model and its assumptions and solve typical problems.

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

18+/-1 bags

b. What is the average number of bags on hand? (Round your final answer to the nearest whole number.)

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Average number of bags

9+/-1

c. How many orders per year will there be? (Round your final answer to the nearest whole number.) Number of orders per year

68+/-1

d. Compute the total cost of ordering and carrying flour. (Round your final answer to the nearest whole number.) Total cost

$

1,350+/-1

e. If annual holding costs were to increase by $9 per bag, 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.) Increase by

$

78.71+/-1

D = 1,215 bags/year S = $10 H = $75 a.

b. Q/2 = 18/2 = 9 bags c. D

=

1,215 bags

=

67.5 orders

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Q

d. TC

=

=

Q 2

H

+

18 1,215 (75) + (10) 2 18

D Q

S

= 675 + 675 = $1,350

e. Assuming that holding cost per bag increases by $9/bag/year

TC

=

17.01 1,215 (84) + (10) 2 17.01

= 714.42 + 714.29 = $1,428.71

Increase by [$1,428.71 – $1,350] = $78.71...