Problem set 3

A bakery buys flour in 25-pound bags. The bakery uses 1,215 bags a year. Ordering cost is $10 per order. Annual carrying cost is $75 per bag. 

a. Determine the economic order quantity. 

b. How many orders per year will there be? 

c. Compute the total cost of ordering and carrying flour. 

d. If holding costs were to increase by $9 per year, how much would that affect the minimum total annual cost?