Tyler decided to open a bakery because everyone he knew told him that his baked goods were “out of this world.” He had a little bit of a business school background because he got his Bachelor’s from SPS at UIW recently. He remembered his teacher telling him that inventory models can be used for both the raw materials as well as the finished products for a business like his. So, he decided to see if he could use the basic EOQ model for identifying how much quantity to order of raw materials such as eggs, flour, sugar, etc. To get started, he decided to create a model for flour based on the information he had on hand regarding potential costs as follows: Usage per month 100 lbs Purchase cost $1 per lb. Order cost $10.00 per order sent Annual Holding Rate
Tyler decided to open a bakery because everyone he knew told him that his baked goods were “out of this world.” He had a little bit of a business school background because he got his Bachelor’s from SPS at UIW recently. He remembered his teacher telling him that inventory models can be used for both the raw materials as well as the finished products for a business like his. So, he decided to see if he could use the basic EOQ model for identifying how much quantity to order of raw materials such as eggs, flour, sugar, etc. To get started, he decided to create a model for flour based on the information he had on hand regarding potential costs as follows:
- Usage per month 100 lbs
- Purchase cost $1 per lb.
- Order cost $10.00 per order sent
- Annual Holding Rate 10% of purchase price per lb.
- 52-week year 300 working days per year
- Lead time 2 days
Write a sentence explaining how Tyler should plan on ordering the flour for his bakery: how much to order and when to order (from the first question).
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