Question

The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC $150 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 $0.02 per month, or $0.24 per year; and annual fuel usage is 180,000 gallons. MBC buses operate 288 days a year.

(a)

What is the optimal order quantity for MBC?

(b)

How frequently should MBC order to replenish the gasoline supply?

---Select--- 1 order 2 orders 3 orders  per  ---Select--- week month year

(c)

The MBC storage tanks have a capacity of 17,500 gallons. Should MBC consider expanding the capacity of its storage tanks?

The maximum inventory is ?

MBC  ---Select--- does not need needs  to expand its storage tanks.

(d)

What is the reorder point (in gallons)?

  gallons

Answer 1