Expenses of delivering and transferring the fule

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Reference no: EM132275599

The ABC purchases diesel fuel from American Petroleum Supply. In addition to fuel cost, American Petroleum Supply charges ABC $250 per order to cover expenses of delivering and transferring the fule to ABC’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/month, and annual fuel usage is 150,000 gallons. ABC buses operate 300 days a year and running out of fuel is not an option

(1) Due to a recent hurricane hitting MBC’s area, ABC storage tanks were partially destroyed. Originally, ABC had a storage capacity of 15,000 gallons. Now, it can only store 10000 gallons. A company nearby offered to rent storage 5000 gallons of storage space to ABC for an annual rental fee of $300. Should ABC rent the space? Show your calculations.

Reference no: EM132275599

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