Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC $450

 

The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC $450 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 10 days; the cost of holding a gallon of fuel in the storage tanks is $0.07 per month, or $0.84 per year; and annual fuel usage is 210,000 gallons. MBC buses operate 210 days a year. a. What is the optimal order quantity for MBC? b. How frequently should MBC order to replenish the gasoline supply? c. The MBC storage tanks have a capacity of 15,000 gallons. Should MBC consider expending the capacity of its storage tanks? d. What is the reorder point?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

To calculate the optimal order quantity for MBC we can use the Economic Order Quantity EOQ formula E... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Quantitative Methods For Business

Authors: David Anderson, Dennis Sweeney, Thomas Williams, Jeffrey Cam

11th Edition

978-0324651812, 324651813, 978-0324651751

More Books

Students also viewed these Finance questions

Question

Am I surfing to avoid feelings of loneliness, stress, or a nger?

Answered: 1 week ago