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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?
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Step: 1
To calculate the optimal order quantity for MBC we can use the Economic Order Quantity EOQ formula E...Get Instant Access to Expert-Tailored Solutions
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Step: 2
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