Answer:
The Deer Valley Farm (DVF)
a. Optimum load size = 7,625 containers
Maximum fertilizer level at the farm = 5,500 containers
Total minimum cost = $189,110,200
b. No. Total inventory costs will increase.
Explanation:
a) Data and Calculations:
Annual demand for fertilizer = 220,000 pounds
Annual production units = 305,000 pounds
Inventory = 85,000 pounds
Cost to transport the fertilizer to and from the plant to the farm = $620
Each container holds = 40 pounds
Annual carrying cost per pound = $0.12
Optimum load size = 305,000/40 = 7,625 containers
Maximum fertilizer level at the farm = 5,500 containers (220,000/40)
Total minimum cost = $ ($620 * 305,000) + ($0.12 * 85,000)
= $189,110,200 ($189,100,000 + 10,200)
