Question

Bruno Fruscalzo decided to start a small production facility in Sydney to sell gelato to the local restaurants local milk supplier charges $0.5 per kg of milk plus a $25 delivery fee (that is independent of the amount ordered). Bruno's holding cost is $0.03 per kg pe . His r month. He needs 9750 kgs of milk per month. Suppose Bruno orders 9750 kgs each time. What is his average inventory a. (kgs)? 4,875kgs (Round your answer to 1 decimal place.) h Suppose Bruno orders 6750 kgs each time. How many orders does he place b. 17.3orders with his supplier each year? How many kgs should Bruno order from his supplier with each order to minimize the sum of ordering and holding costs? C. 4,031kgs (Do not round intermediate calculations. Round your answer to 2 decimal places.) If Bruno's storage vessel can hold only 4000 kgs of milk, what would be Bruno's annual ordering and holding costs? d. 1,451.25 (Do not round intermediate calculations. Round your answer to 2 decimal places.) If Bruno's storage vessel can hold only 6500 kgs of milk, what would be Bruno's annual ordering and holding costs? 1,620.00 (Do not round intermediate calculations. Round your answer to 2 decimal places.) Bruno's supplier's truck can carry 20,000 kgs of milk. The supplier does not want to deliver to more than 3 customers with each truck. Thus, the supplier

Answer 1

Monthly demand, D = 9750

Order cost, S = $ 25

Holding cost, H = $ 0.03

a) Average inventory = Q/2

= 9750/2

= 4875 kgs

b) Number of orders per year = Annual demand / Order quantity

= 9750*12/6750

= 17.3

c) Economic order quantity = sqrt(2DS/H)

= sqrt(2*9750*25/0.03)

= 4031 kgs

d) If storage vessel capacity is limited to 4000 kgs, then optimal order quantity, Q = 4000 kgs

Total monthly ordering and holding cost = SD/Q+HQ/2

= 25*9750/4000+0.03*4000/2

= $ 120.9375

Total annual ordering and holding cost = 120.9375*12

= $ 1451.25

e) If the storage vessel capacity is 6500 kgs, then optimal order quantity = EOQ

= 4031 kgs

Total monthly ordering and holding cost = SD/Q+HQ/2

= 25*9750/4031+0.03*4031/2

= $ 120.94

Total annual ordering and holding cost = 120.94*12

= $ 1451.21