Question

IM.72 The Candy Shack has a monthly demand of 150 bags of Watermelon Slices. They pay $10.97 for each box of candy which contains 12 bags for sale. Their ordering costs are $75. Holding costs are negligible but they do pay 10% annually on the money they borrow to make such purchases. What is the annual demand—in terms of boxes? (Display your answer to the nearest whole number.) 150 What is the materials costs—per bag? (Display your answer to two decimal places.)

Answer 1

Answer:

a). Total annual demand=13 boxes

b). Material cost per bag=$1.60

Explanation:

a). The following expressions can be derived;

Total number of bags=number of bags per box×number of boxes

where;

Total number of bags=150 bags

Number of bags per box=12 bags

Number of boxes=n

Replacing;

150=12×n

12 n=150

n=150/12=12.5

Number of boxes =12.5 rounded to the nearest whole number=13

Total annual demand=13 boxes

b). Material cost per bag

Total material costs=(Cost per box×number of boxes demanded)+Ordering cost

Total material costs=(10.97×13)+75=$217.61

Additional cost=(10/100)×217.61=21.761

Total material costs=(217.61+21.761)=239.371

Material cost per bag=Total material cost/number of bags

where;

Total material cost=$239.371

Total number of bags=150 bags

replacing;

Material cost per bag=239.371/150

Material cost per bag=1.596 to nearest two decimal places=1.60

Material cost per bag=$1.60