Decided to start small production facility

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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 $20 delivery fee (the $20 fee is independent of the amount ordered). Bruno’s holding cost is $0.36 per kg per year. He needs 9000 kg of milk per month. a. How many kg should Bruno order from his supplier with each order to minimize the sum of the ordering and holding costs? b. If Bruno’s storage vessel can hold only 3000 kg of milk, what would be Bruno’s annual ordering and holding costs? c. Bruno’s supplier offers a 5 percent discount when a customer orders a full truck, which is 20,000 kg. Assume Bruno can store that quantity and the product will not spoil. If Bruno orders a full truck, what would be the inventory holding and ordering cost incurred per kg of milk?

Reference no: EM131636229

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