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Barksdale Biscuits is a small manufacturer of gourmet dog biscuits and uses an average of 7,000...

Barksdale Biscuits is a small manufacturer of gourmet dog biscuits and uses an average of 7,000 pounds of flour per week and works 50 weeks per year. Barksdale buys flour at $0.20/lb delivered. It costs them $50 to process an order. They use 12% of the purchase price for flour to calculate the annual holding cost. Calculate the economic order quantity for flour for Barksdale Biscuits. Your Answer:

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Answer #1

Economic order quantity (EOQ) = Square root of [ (2 *D*S) / H]

D stand for Annual demand = Weekly demand * no of week

= 7000 lb * 50 = 350000 lb

S stand for ordering cost per purchase order = $ 50 each order

H stand for Carrying cost per unit. = per unit price * annual holding cost

=$ 0.20 lb * 12% = $ 0.024

EOQ = Square root( 2*350000lb * $50) / ($ 0.024)

= 38188 lb per order

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