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.What is the optimal order quantity for MBC?(Is it 12,500 gallons?)How frequently should MBC place an order to replenish the gasoline supply?(Is it 25 days?)What is the reorder point? (5,000 gallons?)
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.
What is the optimal order quantity for MBC?
(Is it 12,500 gallons?)
How frequently should MBC place an order to replenish the gasoline supply?
(Is it 25 days?)
What is the reorder point?
(5,000 gallons?)
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