Question

Next Several Questions refer to the following SAME paragraph : Pixar Foods faces annual demand for Rice Krisp and Oat Crisp cereals of 480,000 and 840,000 boxes respectively. Each box contains 9 ounces of the respective grain (rice or oats and never both), and both grains are imported from India. Pixar Foods has computed its ordering cost as US\$60 per order. They pay their Indian supplier 12.5 US cents per pound (there are 16 ounces in a pound) of Rice and 10 cents per pound of Oats. The annual holding cost of either grain is 20% of the value of the grain. Answer the following questions based on the data above (choose the closest number). The optimum order quantity for rice in pounds is:

a.40 K
b.42.2 K
c.36K
d.38.8 K

Answer 1

To find the optimum order quantity for rice in pounds, use the economic order quantity (EOQ) formula. Based on the options provided, the closest answer is 38.8 K.

Step-by-step explanation:

To find the optimum order quantity for rice in pounds, we need to use the economic order quantity (EOQ) formula.

EOQ is given by the formula:

`EOQ = √((2DS)/H)`

Where D is the annual demand, S is the ordering cost per order, and H is the annual holding cost per unit.

In this case, D = 480,000 boxes, S = $60, and H = 0.2 * (0.125/16) * 365 * Price per pound of rice.

The price per pound of rice is not given, so we cannot find the exact answer.

However, based on the options provided, the closest answer is 38.8 K.