Use this information to answer the following questions.
A bakery buys sugar in 15-pound bags.The bakery uses 5000 bags of sugar each year.Carrying costs are $20 per bag per year.Ordering costs are estimated at $5 per order.Assume that the bakery is open 250 days a year and its daily demand is estimated at 20 bags.It takes 5 days for each order of sugar to be filled.
-Refer to the information above.What is the minimum inventory held in a given EOQ cycle?
A)0 bags
B)2500 bags
C)50 bags
D)25 bags
E)100 bags

Question

Quizplus · Accepted Answer

The minimum inventory held in a given EOQ cycle is the safety stock, which is equal to the average daily demand multiplied by the lead time. In this case, the average daily demand is 20 bags and the lead time is 5 days, so the safety stock is 20 bags * 5 days = 100 bags.

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