Please show the formulas and your work. Thanks! The Frisbee Baking Division of B
ID: 2532805 • Letter: P
Question
Please show the formulas and your work. Thanks!
The Frisbee Baking Division of Block C Enterprises bakes and sells pies at the rate of 275 per day, 300 days per year. The ordering cost for the pie 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 Cost $0.16 $0.14 $0.12 $0.10 $0.08 1 to 10000 10001 to 15000 15001 to 20000 20001 to 25000 25001 and above Calculate the annual ordering cost for these shells.Explanation / Answer
Given data : Annual demand = 275*300 Annual demand = 82500 shells Ordering cost = $70 per order Holding cost = $0.05 per shell per year. Formulas : Total Ordering cost = Number of orders per annum * ordering cost Number of orders per annum = Annual demand / order quantity Order Quantity = Square root of : [(2* Annual Demand* Ordering Cost)/ cost of carrying one unit of inventory for one year)] Therefore the optimal ordering quantity = sq. rt of : [(2*275*300) *70]/0.05 ] is approx. = 15200 shells per order so, no of orders placed in a year = 82500/15200 will be approximately rounded to 6 orders Ordering cost will be $70 per order, So, ordering cost per year will be 6*$70 420 Purchase cost =(82500 *0.12) 9900 Total ordering cost = 420 + 9900 10320