5. Nelson Energy (NS) sells its premium diesel 365 days a year. NS has estimated that...

   

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5. Nelson Energy (NS) sells its premium diesel 365 days a year. NS has estimated that its average weekly demand for the diesel is 1,000 liters, the lead time for diesel delivery from its overseas supplier is 30 days, the cost of transporting the diesel from the overseas supplier is $10,000 each occasion, the purchase cost of the diesel is $10/liter, and the annual carrying cost rate is 50% per year. (a) Use the Economic Order Quantity model to determine the quantity of the diesel NS should purchase from the overseas supplier each time, the reorder point and the purchase frequency. (10 marks) (b) Suppose that the transportation cost estimated by NS's accountant is inaccurate and the cost of transporting the diesel from the overseas supplier each occasion is $15,000 rather than $10,000. Determine the increase in annual total inventory cost due to the accountant's inaccurate estimation. (15 marks) 5. Nelson Energy (NS) sells its premium diesel 365 days a year. NS has estimated that its average weekly demand for the diesel is 1,000 liters, the lead time for diesel delivery from its overseas supplier is 30 days, the cost of transporting the diesel from the overseas supplier is $10,000 each occasion, the purchase cost of the diesel is $10/liter, and the annual carrying cost rate is 50% per year. (a) Use the Economic Order Quantity model to determine the quantity of the diesel NS should purchase from the overseas supplier each time, the reorder point and the purchase frequency. (10 marks) (b) Suppose that the transportation cost estimated by NS's accountant is inaccurate and the cost of transporting the diesel from the overseas supplier each occasion is $15,000 rather than $10,000. Determine the increase in annual total inventory cost due to the accountant's inaccurate estimation. (15 marks)

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The image provided shows a question for an operations management or supply chain management class concerning the calculation of Economic Order Quantit... View the full answer