Question

purchases flour in 15-pound bags. Panera Bread uses 5000 bags of flours each year. Carrying/holding costs are $20 per bag per year. Ordering costs are estimated at $5 per order. Assume that Panera Bread Chicago bakery is open 250 days a year and its daily demand is estimated at 20 bags. It takes 5 days for each order of flour to be filled. What is the total cost of ordering and holding sugar?

Answer 1

$1,000

Step-by-step explanation:

For computing the total cost of ordering cost and the carrying cost first we have to find out the economic order quantity is shown below:

`= \sqrt{\frac{2* \text{Annual demand}* \text{Ordering cost}}{\text{Carrying cost}}}`

where,

Annual demand = 5,000

Ordering cost per order = $5

Holding cost per bag per year = $20

After solving this the units is 50

Now the total cost is

= Annual ordering cost + Annual carrying cost

= Annual demand ÷ Economic order quantity × ordering cost per order + Economic order quantity ÷ 2 × carrying cost per unit

=5,000 ÷ 50 × $5 + 50 ÷ 2 × $20

= $500 + $500

= $1,000