Question

Bruno Fruscalzo decided to start a small production facility in Sydney to sell gelato to the local restaurants. His local milk supplier charges $0.50 per kg of milk plus a $21 delivery fee (the $21 fee is independent of the amount ordered). Bruno’s holding cost is $0.03 per kg per month. He needs 9000 kg of milk per month.

Round your answer to 3 digits after the decimal point. Do NOT use comma in your numeric answers.

If Bruno’s storage vessel can hold at most 6000 kg of milk, then Bruno should order _______ kg each time in order to minimize the annual ordering and holding costs. The minimized annual ordering and holding costs will be $ ________.

Bruno’s supplier offers a 5% discount when a customer orders a full truck, which is 20000 kg. Assume Bruno can store that quantity and the product will not spoil. If Bruno orders a full truck, then the annual inventory holding cost will be $ _______ per kg, the annual purchasing cost will be $ _______, and the annual ordering and holding costs will be $ _______.

Answer 1