Order to minimize the sum of ordering and holding costs

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Reference no: EM132135333

Bruno Fruscalzo decided to start a small production facility in Sydney to sell gelato to the local restaurants. His local milk supplier charges $0.50 per kg of milk plus a $15 delivery fee (that is independent of the amount ordered). Bruno’s holding cost is $0.01 per kg per month. He needs 9000 kgs of milk per month.

a. Suppose Bruno orders 8750 kgs each time. What is his average inventory (kgs)? kgs

(Round your answer to 1 decimal place.)

b. Suppose Bruno orders 8000 kgs each time. How many orders does he place with his supplier each year? orders

c. How many kgs should Bruno order from his supplier with each order to minimize the sum of ordering and holding costs? kgs

d. If Bruno’s storage vessel can hold only 3250 kgs of milk, what would be Bruno’s annual ordering and holding costs?

e. If Bruno’s storage vessel can hold only 5000 kgs of milk, what would be Bruno’s annual ordering and holding costs?

f. Bruno’s supplier’s truck can carry 20,000 kgs of milk. The supplier does not want to deliver to more than 3 customers with each truck. Thus, the supplier requires a minimum order quantity of 6,500 kgs. If Bruno orders the minimum amount, what would be the sum of his annual ordering and holding costs? Assume he has a storage vessel large enough to hold 6,500 kgs.

(Round your answer to 3 decimal places.)

g. Bruno’s supplier offers a 2.00% discount when a customer orders a full truck, which is 20,000 kgs. Assume Bruno can store that quantity and the product will not spoil. If Bruno orders a full truck, what would be the inventory holding and ordering cost incurred per kg of milk?

Reference no: EM132135333

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