LO.10 (Appendix: EOQ) Diane Delbert operates a health food bakery that uses a special type of ground flour in one of its high-margin products. The bakery operates 365 days a year. Delbert finds that she seems to order either too much or too little special flour and asks for your help. After some discussion, you find that she has no idea of when or how much to order. An examination of her records and answers to further questions reveal the following information:

Financial Management: Theory & Practice
16th Edition
ISBN:9781337909730
Author:Brigham
Publisher:Brigham
Chapter24: Bankruptcy, Reorganization, And Liquidation
Section: Chapter Questions
Problem 7MC
icon
Related questions
Question
LO.10 (Appendix: EOQ) Diane Delbert operates a health food bakery that uses a
special type of ground flour in one of its high-margin products. The bakery operates
365 days a year. Delbert finds that she seems to order either too much or too little
special flour and asks for your help. After some discussion, you find that she has no idea
of when or how much to order. Än examination of her records and answers to further
questions reveal the following information:
Annual usage of special flour
7,000 pounds
Average number of days delay between initiating and receiving an order
12
Estimated cost per order
$32.00
Estimated annual cost of carrying a pound of special flour in inventory
$0.50
a. Calculate the economic order quantity for flour.
b. Assume that Delbert desires a safety stock cushion of seven days’usage. Calculate
the appropriate order point.
Transcribed Image Text:LO.10 (Appendix: EOQ) Diane Delbert operates a health food bakery that uses a special type of ground flour in one of its high-margin products. The bakery operates 365 days a year. Delbert finds that she seems to order either too much or too little special flour and asks for your help. After some discussion, you find that she has no idea of when or how much to order. Än examination of her records and answers to further questions reveal the following information: Annual usage of special flour 7,000 pounds Average number of days delay between initiating and receiving an order 12 Estimated cost per order $32.00 Estimated annual cost of carrying a pound of special flour in inventory $0.50 a. Calculate the economic order quantity for flour. b. Assume that Delbert desires a safety stock cushion of seven days’usage. Calculate the appropriate order point.
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Determination of Tax Liability
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
SWFT Individual Income Taxes
SWFT Individual Income Taxes
Accounting
ISBN:
9780357391365
Author:
YOUNG
Publisher:
Cengage
Intermediate Financial Management (MindTap Course…
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser…
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning