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

a. Calculate the economic order quantity for flour.

b. Assume that Chone desires a safety stock cushion of seven days’ usage. Calculate the appropriate order point.

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Annual usage of flour Average number of days delay between initiating and receiving an order Estimated cost per order Estimated annual cost of carrying a pound of flour in inventory 14,000 pounds 12 $16.00 $0.50