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A large bakery buys flour in 25 kg bags. The bakery uses an average of 4,860 bags a year. Preparing an order and receiving the shipment of flour bags involves a cost of $ 10 per order. Annual holding cost is $5 per flour bag. (LOB)
a. Determine the economic order quantity.
b. What is the average number of bags on hand (i.e., in inventory)?
c. How many orders per year will there be?
d. Calculate the total annual cost of ordering and holding flour.
e. If ordering cost were to increase by 50 percent per order, by what percentage would the EOQ change?
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