Question

# Bruno Fruscalzo decided to start a small production facility in Sydney to sell gelato to the...

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.

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 \$ _______.

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