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What is the optimal order quantity for MBC

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Reference no: EM132916203

Question - 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 form 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 per year.

Required -

What is the optimal order quantity for MBC?

How frequently should MBC order to replenish the gasoline supply?

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

What is the reorder point?

Reference no: EM132916203

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