508 go book contents go a. Develop an A-B-C classification for these items b. Ho

Question

508 go book contents go a. Develop an A-B-C classification for these items b. How could the manager use this information? c. After reviewing your classification scheme, suppose that the manager decides to place item PO5 into the A category. What are some possible explanations for this decision? 4. A large bakery buys flour in 25 kg bags. The bakery uses an average ot 4 860 bags a year Preparing an order, receiving the shipment, and paying the invoice costs $10 per order. Annual holding cost is $5 per flour bag LO3 a. Determine the economic order quantity b. What is the average number of bags on hand G.e., average cycle inventory) if EOO is used? c. How many orders per year will there be if EOQ is used? d. Calculate the total annual cost of ordering and holding flour for EOQ e. If ordering cost were to increase by 50 percent per order, by what percentage would the EOQ change? 5. A large law firm uses an average of 10 packages of copier paper a day. Each package contains 500 sheets The firm operates 260 days a yeat. Holding cost for the paper is $1 per year per package, and ordering cost is $10 per orcer. LOS a. What order quantity would minimize total annual ordering and holding cost? o Calcutate the totel snnua ventory contiol coest tsine your order quanty trom part

Explanation / Answer

Earlier EOQ = (2*demand*order cost/holding cost)^1/2

= (2*4680*10/5)^1/2=137

New Ordering cost = 15 $

SO new EOQ = (2*4680*15/5)^1/2= 168

So change = (168-138)/138 *100 = 21.74%

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