Question

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* = _______ 

b. How frequently should MBC order to replenish the gasoline supply?

 _______  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 answer- the capacity of its storage tanks. 

d. What is the reorder point? 

r = _______  gallons

Wilson Publishing Company produces books for the retail market. Demand for a current book is expected to occur at a constant annual rate of 7,800 copies. The cost of one copy of the book is $13. The holding cost is based on an 15% annual rate, and production setup costs are $140 per setup. The equipment on which the book is produced has an annual production volume of 22,000 copies. Wilson has 250 working days per year, and the lead time for a production run is 13 days. Use the production lot size model to compute the following values: 

a. Minimum cost production lot size. Round your answer to the nearest whole number. Do not round intermediate values. 

b. Number of production runs per year. Round your answer to two decimal places. Do not round intermediate values. 

Number of production runs per year = _______  

c. Cycle time. Round your answer to two decimal places. Do not round intermediate values 

T = _______ days 

d. Length of a production run. Round your answer to two decimal places. Do not round intermediate values. 

Production run length = _______  days 

e. Maximum inventory. Round your answer to the nearest whole number. Do not round intermediate values. 

Maximum inventory = _______  

f. Total annual cost. Round your answer to the nearest dollar. Do not round intermediate values 

Total annual cost = _______  

g. Reorder point. Round your answer to the nearest whole number. Do not round intermediate values. 

r = _______ 

The A&M Hobby Shop carries a line of radio-controlled model racing cars. Demand for the cars is assumed to be constant at a rate of 29 cars per month. The cars cost $58 each, and ordering costs are approximately $13 per order, regardless of the order size. The annual holding cost rate is 25% 

a. Determine the economic order quantity and total annual cost under the assumption that no backorders are permitted. If required, round your answers to two decimal places. Q7.21 Total Cost 104.56 

b. Using a $50 per-unit per-year backorder cost, determine the minimum cost inventory policy and total annual cost for the model racing cars. If required, round your answers to two decimal places. S1.84 Total Cost S 

c. What is the maximum number of days a customer would have to wait for a backorder under the policy in part (b)? Assume that the Hobby Shop is open for business 300 days per year. If required, round your answer to two decimal places. Length of backorder period - days 

d. Would you recommend a no-backorder or a backorder inventory policy for this product? Explain. If required, round your answers to two decimal places. Recommendation would be-Select your answer-inventory policy, since the maximum wait is only days and the cost savings is $ 

e. If the lead time is six days, what is the reorder point for both the no-backorder and backorder inventory policies? If required, round your answers to two decimal places Reorder point for no-backorder inventory policy is Reorder point for backorder inventory policy is

Answer 1

Question - 1 :-

(a) :

What is the optimal order quantity for MBC?

Q*=20,000 Units.

(b) :

How frequently should MBC order to replenish the gasoline supply?

Number of productions per year = D/Q*

= 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 expanding the the capacity of its storage tanks?

Given as optimal order quantity for MBC equals 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,

Total Annual Cost =

By substituting values we get,

Total Annual cost = $ 1658.0265