Question 1 (1 polnt) dl The Frisbee Baking Division of Block C Enterprises bakes

Question

Question 1 (1 polnt) dl The Frisbee Baking Division of Block C Enterprises bakes and sells ples at the rate of 275 per day, 300 days per year. The ordering cost for the ple baking shells is $70, the holding cost for these shells Is estimated to be $0.05 annually. Pie shells are available at the following prices: Order size 1 to 10000 10001 to 15000 15001 to 20000 20001 to 25000 25001 and above Cost $0.16 $0.14 $0.12 $0.10 0.08 Calculate the annual ordering cost for these shells. $81 $105 $132 $162 $195 $231 $270 336 Save

Explanation / Answer

Demand (D) = 275*300 = 82500

Holding cost (H) = 0.05

Ordering cost (S) = 70

EOQ = sqrt(2*D*S/H) = sqrt(2*82500*70/0.05) = 15,199

Total cost = Holding cost + Ordering cost + Demand*Price = EOQ/2*H + D/EOQ*S + D*P

For Q = 15,199,

= 15199/2*0.05 + 82500/15199*70 + 82500*0.12 = 10,660

For Q = 20001

= 20001/2*0.05 + 82500/20001*70 + 82500*0.10 = 9039

For Q = 25001

= 25001/2*0.05 + 82500/25001*70 + 82500*0.08 = 7456

Hence, best is to order 25001 units

Ordering cost will be: 82500/25001*70 = 231

Ans: 231

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