Math Solutions

[Solution] The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply (APS). In addition to the fuel cost, APS charges MBC

Question: The Metropolitan Bus Company (MBC) purchases diesel fuel from American Petroleum Supply (APS). In addition to the fuel cost, APS charges MBC $250 per order to cover expenses of delivering and transferring the fuel to MBC’s storage tanks. The lead time for a new shipment The lead time for a new shipment from APS is 10 days. The cost of holding a gallon of fuel in the storage tanks is $0.04 per month, which is $0.48 per year. The annual fuel usage is 150 000 gal. MBC buses operate 300 days each year.

  1. What is the optimal order quantity for MBC?
  2. How frequently should MBC order to replenish the fuel supply?
  3. The MBC fuel tanks have a capacity of 15 000 gal. Should MBC consider expanding the storage capacity?
  4. What is the reorder point?

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