Question
The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC $300 per
The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC $300 per order to cover the expenses of delivering and transferring the fuel to MBC's storage tanks. The lead time for a new shipment from American Petroleum is 7 days; the cost of holding a gallon of fuel in the storage tanks is $0.04 per month or $0.48 per year. The annual fuel usage is 250,000 gallons. MBC buses operate 300 days a year.
1)What is the optimal order quantity in gallons for MBC? Express your answer to 2 decimal places using standard rounding rules.
2)How frequently should MBC place an order to replenish the gasoline supply? Express your answer in days and as a whole number using standard rounding rules.
3)What is the reorder point? Express your answer to 2 decimal places using standard rounding rules.
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