Replenish the gasoline supply

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Reference no: EM131036530

The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC $250 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 $0.04 per month, or $0.48 per year; and annual fuel usage is 150,000 gallons. MBC buses operate 300 days a year.

a. What is the optimal quantity for MBC?

b. how frequently should MBC order to replenish the gasoline supply?

c. the MBC storage tanks have a capacity of 15,000 gallons. Should MBC consider expanding the capacity of its storage tanks?

d. what is the recorder point?

Reference no: EM131036530

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