What is the optimal order quantity for MBC? Q* = fill in the blank 1 How frequently should MBC order to replenish the gasoline supply? fill in the blank 2 orders per year The MBC storage tanks have a capacity of 15,000 gallons. Should MBC consider expending the capacity of its storage tanks? Metropolitan Bus Company the capacity of its storage tanks. What is the reorder point?
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC $200 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 annual fuel usage is 120,000 gallons. MBC buses operate 300 days a year.
- What is the optimal order quantity for MBC?
Q* = fill in the blank 1 - How frequently should MBC order to replenish the gasoline supply?
fill in the blank 2 orders per year - The MBC storage tanks have a capacity of 15,000 gallons. Should MBC consider expending the capacity of its storage tanks?
Metropolitan Bus Company the capacity of its storage tanks. - What is the reorder point?
r = fill in the blank 4 gallo
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