Answer Happy

The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply. In addition to the fuel cost, American Petroleum Supply charges MBC $200 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 $0.04 per month, or $0.48 per year; and annual fuel usage is 120,000 gallons. MBC buses operate 300 days a year. (a) What is the optimal order quantity for MBC? 10000 (b) How frequently should MBC order to replenish the gasoline supply? 1 order per month (c) The MBC storage tanks have a capacity of 12,500 gallons. Should MBC consider expanding the capacity of its storage tanks? The maximum inventory is to expand its storage tanks. (d) What is the reorder point (in gallons)? gallons MBC does not need ✓