American Airlines has an agreement to buy jet fuel from BP. The goal is to minimize total cost (i.e., ordering cost + holding cost). The annual demand for fuel is 43,000 barrels. BP charges American $2100 to process each order. American incurs a holding cost of $28 per barrel.
When purchasing using the EOQ of 2540, what is the order cycle time (days between orders) for American?
Number of Orders annually = Total Demand/EOQ
= 43000/2540
= 16.93
Time Between Orders = Number of working days per year/Number of orders
= 365/16.93 (We consider that there are 365 days each years)
= 21.56 Days
American Airlines has an agreement to buy jet fuel from BP. The goal is to minimize...