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liraira [26]
2 years ago
6

"Jack owns a local trucking company. With fuel costs being expensive, Jack wants to evaluate how much fuel, on average, he shoul

d store in his 6,800 gallon fuel tank. Each year Jack uses 68,000 gallons of diesel (usage is spread evenly throughout the year). Jack knows with certainly that he can have a load of fuel delivered in 5 days. The price of fuel is $2.04 per gallon and there is a separate $50 ordering fee per order. Jack thinks his holding cost per unit is 40%. If Jack orders at EOQ, what will be the average inventory of fuel in his 6,800 gallon tank?"
Business
1 answer:
Brut [27]2 years ago
4 0

Answer: 1443.5 gallons

Explanation:

Thw following can be gotten from the question:

Fuel tank capacity = 6800 gallon

Annual demand, A = 68000 gallons

Ordering cost, O= $50

Carrying cost, C = 40% × $2.04 = $0.816

EOQ = ✓2AO/✓C

= ✓(2×68000×50) / ✓0.816

= ✓6800000 / ✓0.816

= 2887

Average inventory = EOQ/2

= 2887/2

= 1443.5 gallons

Therefore, the average inventory will be 1443.5 gallons.

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