Question
A company buys steel for its production lines. Steel is supplied by rail cars at the rate of 1,850 tons per day at a price
A company buys steel for its production lines. Steel is supplied by rail cars at the rate of 1,850 tons per day at a price of $25.00 per ton and is used at a rate of 1,100 tons per day. The company operates 320 days per year, and its monthly carrying cost is 5 percent of the price per ton of steel. The ordering cost for a shipment of steel is $200.
a)How many tons of steel should be in a production batch?
b)How much storage capacity should be recommended?
c)How many trips are needed to meet the production batch (as to minimize the total stocking cost)?
d)What is the total annual carrying cost?
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