# Question: The Blue Cab Company is the primary taxi company in

The Blue Cab Company is the primary taxi company in the city of Maintown. It uses gasoline at the rate of 10,000 gallons per month. Because this is such a major cost, the company has made a special arrangement with the Amicable Petroleum Company to purchase a huge quantity of gasoline at a reduced price of $3.50 per gallon every few months. The cost of arranging for each order, including placing the gasoline into storage, is $2,000. The cost of holding the gasoline in storage is estimated to be $0.04 per gallon per month.

T (a) Use the Solver version of the Excel template for the basic EOQ model to determine the costs that would be incurred annually if the gasoline were to be ordered monthly.

T (b) Use this same spreadsheet to generate a table that shows how these costs would change if the number of months between orders were to be changed to the following values: 1, 2, 3, . . . , 10.

T (c) Use the Solver to find the optimal order quantity.

T (d) Now use the analytical version of the Excel template for the basic EOQ model to find the optimal order quantity. Compare the results (including the various costs) with those obtained in part (c).

(e) Verify your answer for the optimal order quantity obtained in part (d) by applying the EOQ formula by hand.

T (a) Use the Solver version of the Excel template for the basic EOQ model to determine the costs that would be incurred annually if the gasoline were to be ordered monthly.

T (b) Use this same spreadsheet to generate a table that shows how these costs would change if the number of months between orders were to be changed to the following values: 1, 2, 3, . . . , 10.

T (c) Use the Solver to find the optimal order quantity.

T (d) Now use the analytical version of the Excel template for the basic EOQ model to find the optimal order quantity. Compare the results (including the various costs) with those obtained in part (c).

(e) Verify your answer for the optimal order quantity obtained in part (d) by applying the EOQ formula by hand.

**View Solution:**## Answer to relevant Questions

Consider the overbooking model presented in Sec. 18.8. For a specific application, suppose that the parameters of the model are p = 0.5, r = $1,000, s = $5,000, and L = 3. Use the binomial distribution directly (not the ...Read the referenced article that fully describes the OR study summarized in the application vignette presented in Sec. 18.7. Briefly describe how inventory theory was applied in this study. Then list the various financial ...Suppose that the demand D for a spare airplane part has an exponential distribution with mean 50, that is, This airplane will be obsolete in 1 year, so all production of the spare part is to take place at present. The ...Every Saturday night a man plays poker at his home with the same group of friends. If he provides refreshments for the group (at an expected cost of $14) on any given Saturday night, the group will begin the following ...Reconsider Prob. 19.2-5. (a) Formulate a linear programming model for finding an optimal policy.Post your question