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ow much should Tyler plan on ordering the flour for his bakery? When should Tyler order the flour for his bakery

ow much should Tyler plan on ordering the flour for his bakery? When should Tyler order the flour for his bakery

Purchasing and Supply Chain Management
Purchasing and Supply Chain Management
6th Edition
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Chapter2: The Purchasing Process
Section: Chapter Questions
Problem 1GPE
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How Tyler should plan on ordering the flour for his bakery.  Based on the attached:

  1. How much should Tyler plan on ordering the flour for his bakery?
  2. When should Tyler order the flour for his bakery
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 Ibs. • Purchase cost $1 per Ib. Order cost $10.00 per order sent Annual Holding Rate 10% of purchase price per Ib. • 52-week year 300 working days per year • Lead time 2 days Fill in the following table based on this information: # Optimal Inventory Policy Answer Туре 1 Economic Order Quantity Q* Annual Inventory Holding Cost H 490 Ibs. 2 24.5 dollars Annual Ordering Cost O 24.48 dollars 1248.99 dollars Total Annual Cost TC 5 Maximum Inventory Level Q 6 Average Inventory Level Q/2 4 490 Ibs. 245 Ibs. Ibs. 7 Reorder Point r 8 left Number of Orders Per Year 8 (D/Q*) 9 Cycle Time (Days) T 2.45 122.47 days
Transcribed Image Text: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 Ibs. • Purchase cost $1 per Ib. Order cost $10.00 per order sent Annual Holding Rate 10% of purchase price per Ib. • 52-week year 300 working days per year • Lead time 2 days Fill in the following table based on this information: # Optimal Inventory Policy Answer Туре 1 Economic Order Quantity Q* Annual Inventory Holding Cost H 490 Ibs. 2 24.5 dollars Annual Ordering Cost O 24.48 dollars 1248.99 dollars Total Annual Cost TC 5 Maximum Inventory Level Q 6 Average Inventory Level Q/2 4 490 Ibs. 245 Ibs. Ibs. 7 Reorder Point r 8 left Number of Orders Per Year 8 (D/Q*) 9 Cycle Time (Days) T 2.45 122.47 days
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