The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC $250 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 $0.04 per month, or $0.48 per year; and the annual fuel usage is 150,000 gallons. MBC buses operate 300 days a year. a. What is the optimal order quantity for MBC?b. How frequently should MBC order to replenish the gasoline quantity?c. What is the reorder point?

Economic order quantity is the optimal quantity that the business needs to buy the inventory to…

Answered: a. What is the optimal order quantity…

a. What is the optimal order quantity for MBC? b. How frequently should MBC order to replenish the gasoline quantity? c. What is the reorder point?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter11: Simulation Models

Section: Chapter Questions

Problem 47P

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