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# There are 3 Problems: The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC \$300 per order to co...

There are 3 Problems:

The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC \$300 per order to cover the expenses of delivering and transferring the fuel to MBC's storage tanks. The lead time for a new shipment from American Petroleum is 10 days; the cost of holding a gallon of fuel in the storage tanks is S0.03 per month, or \$0.36 per year; and annual fuel usage is 240,000 gallons. MBC buses operate 300 days a year. a. What is the optimal order quantity for MBC? Q*1154.70 b. How frequently should MBC order to replenish the gasoline supply? 207 orders per year C. The MBC storage tanks have a capacity of 15,000 gallons. Should MBC consider expending the capacity of its storage tanks? Metropolitan Bus Company -Select your answerthe capacity of its storage tanks. d. What is the reorder point? 1071.8 gallons

Solution:-

Question - 1 :-

(a) :

What is the optimal order quantity for MBC?

Units.

(b) :

How frequently should MBC order to replenish the gasoline supply?

Number of productions per year =

= 240000 / 20000

= 12

Number of productions per year = 12 orders per day

(c) :

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

Given as, optimal order quantity for MBC equals to 15,000 gallons, and its storage tanks capacity is 20,000 gallons (which is the optimal quantity), MBC should consider expanding the capacity of its storage tanks.

(d) :

What is the reorder point?

We knopw that, r = d * m

r = (240000 /  300) * 10

r = 800 * 10

r = 8,000 gallons.

Question - 2 :-
(f):-

Here we have to find out the total annual cost.

Here we know the formula, i.e,

By substituting values we get,

Total Annual cost = \$ 1658.0265

Total Annual cost = \$ 1658.0265

Note:-

As per chegg rule, 2 questions are enough to answer. if you want another question also please upload it as another question. Please don't give thumbs down.

THANK YOU

##### Add Answer of: There are 3 Problems: The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC \$300 per order to co...
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