Your Name:
Question 1
A bakery buys flour in 25-pound bags. The bakery uses 1,215 bags a year. Ordering cost is $10
per order. Annual carrying cost is $75 per bag.
a. Determine the economic order quantity.
b. How many orders per year will there be?
c. Compute the total cost of ordering and carrying flour.
d. If holding costs were to increase by $9 per year, how much would that affect the minimum
total annual cost?
Solution:
D=1215 bags/year; S = $10 per order; H = $75 per bag
a.
b.
(it is not necessary to round up.)
c.
d.
= $1350
per bag.
Difference = $1428 - $1350 = $78
Increase by $78
Your Name:
Question 2
The Friendly Sausage Factory (FSF) can produce hot dogs at a rate of 5,000 per day. FSF
supplies hot dogs to local restaurants at a steady rate of 250 per day. The cost to prepare the
equipment for producing hot dogs is $66. Annual holding costs are 45 cents per hot dog. The
factory operates 300 days a year. Find:
a. the optimal run size.
b. The number of runs per year.
c. How many days does it take to product the optimal run quantity?
Solution:
p=5000 per day; u=250 per day; S=$66; H=$0.45 per hot dog; Tyear=300 days
a.
b. Cycle time =
c.
; # runs =
(it is not necessary to round)
Your Name:
Question 3
Given the monthly usages in the following table, classify the items in A, B, and C categories
according to dollar usage:
Item
4021
9402
4066
6500
9280
4050
6850
3010
4400
Usage
90
300
30
150
10
80
2000
400
5000
Unit Cost
$1,400
12
700
20
1,020
140
10
20
5
Solution:
Item
4021
4400
4066
6850
4050
9280
3010
9402
6500
Usage
90
5000
30
2000
80
10
400
300
150
Unit
Cost
$1,400
$5
$700
$10
$140
$1,020
$20
$12
$20
Total Cost
$126,000
$25,000
$21,000
$20,000
$11,200
$10,200
$8,000
$3,600
$3,000
% item
1.12%
62.03%
0.37%
24.81%
0.99%
0.12%
4.96%
3.72%
1.86%
% cost
55.26%
10.96%
9.21%
8.77%
4.91%
4.47%
3.51%
1.58%
1.32%
Classification
55.26% A
B
B
28.95% B
C
C
C
C
15.79% C