Calculate the optimal size of the milk storage tank

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Reference no: EM131308164

Root Cream Company plans to buy 20,000 gallons of milk annually. It will buy the milk at $2.45 a gallon, plus $30 charge per delivery. The cost of capital for Root is 10%. The storage cost of the milk, at the average inventory level, is 2 cents per gallon per day. However, due to state regulations it cannot store the milk for more than 5 days. Calculate the optimal size of the milk storage tank that it should acquire. 274 gallon ♥

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Reference no: EM131308164

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