Optimal order quantity by equating annual ordering cost

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Reference no: EM132256999

In Problem 1, demand for gasoline is still 1500 gallons per day. Your inventory carrying cost is 60 cents per gallons per year and ordering cost is $120 per order. Compute the annual carrying cost, ordering cost, and total cost for order quantities 10,000 to 20,000 gallons with an interval of 1000 gallons and plot them on a graph. (Either on a graph paper or Excel worksheet). Determine the optimal order quantity by equating the annual ordering cost and inventory carrying cost. Check that the two costs are equal at the optimal order quantity.

Reference no: EM132256999

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