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Determine the economic order quantity

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Reference no: EM132714003

The NY taxi company uses a gasoline at a consistent rate with the with following details:

Demand = 200,000 gallons per year

Ordering charge = $40 per order

Gasoline evaporation and storage cost = 10% per year

Gasoline cost per gallon = $1.80

Number of working days per year = 250 days

a. How much gasoline should the company purchase with each order, i.e., determine the economic order quantity.

b. What is the average inventory level for the gasoline?

c. What is the total annual ordering and carrying cost?

d. What is the penalty if the company can purchase only 6500 gallons at each order due to the tank's holding capacity?

e. Should the company spend $446 to have an additional storage tank installed?

Reference no: EM132714003

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