A hotel purchases 8,000 gallons of a cleaning product. Each gallon costs $10 and the cost of holding one gallon for a year is estimated to be $3. The ordering cost amounts to $30 per order. If the hotel orders in lots of 500 gallons, how many orders does it place each year?What are the ordering and holding costs, and total annual cost?If the economic ordering quantity is used, how much improvement in cost will result?

Data given in this problem are Annual demand (D) = 8000 gallons Cost of each gallon = $ 10 Holding…

Answered: A hotel purchases 8,000 gallons of a…

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter2: Introduction To Spreadsheet Modeling

Section: Chapter Questions

Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...

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A hotel purchases 8,000 gallons of a cleaning product. Each gallon costs $10 and the cost of holding one gallon for a year is estimated to be $3. The ordering cost amounts to $30 per order.

If the hotel orders in lots of 500 gallons, how many orders does it place each year?
What are the ordering and holding costs, and total annual cost?
If the economic ordering quantity is used, how much improvement in cost will result?

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