Answer: a. 18 ; b. 9
Step-by-step explanation:
a. Determine the economic order quantity.
The following can be derived from the question:
Annual demand D = 1215 bags
Ordering cost S = $10
Holding cost H = $75
Economic order quantity = ✓2DA/H
= ✓2 × 1215 × 10/75
= 18
b. What is the average number of bags on hand
This will be gotten by dividing the economic order quantity by 2 which will be:
= 18/2
= 9