Bruno Fruscalzo decided to start a small production facility in Sydney to sell gelato to local restaurants.
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Question:
Bruno Fruscalzo decided to start a small production facility in Sydney to sell gelato to local restaurants. His local milk supplier charges $0.50 per kg of milk plus a $20 delivery fee (the $20 fee is independent of the amount ordered). Bruno's holding cost is $0.03 per kg per month. He needs 9,000 kg of milk per month.
Suppose Bruno orders the quantity from part c, (c= 3,464.10 kg), that minimizes the sum of the ordering and holding costs each time he places an order with the supplier. What is the annual cost of the EOQ expressed as a percentage of the annual purchase cost?
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