A firm is trying to decide how much of a particular liwuid should be ordered. The liquid is kept in a storage tank; there are separate infow and outflow pipes for the tank. THe firm uses 500 gallonsof liquid per day. When an order is placed with the supplier of the liwuid, the truck arrives 7 days later to pump liwuid into the tank. Because of the small size of the input pipe, only 2,500 gallons per day can be pumped into the tank. THe fixed costs of placing an order are $500 per order. Carrying costs are 20 percent per year, and each gallon of liquid costs $10. The firm keeps a safety stock os 1,000 gallons of liquid on hand at all times. Use a 360 day year: 

i. Calculate the economic order quantity and the order point. 

ii. Assume that the maximum capacity of the tank is 10,000 gallons. For your ordering strategy, will the tank overflow? Explain why or why not

Answer rating: 100% (QA)

To calculate the economic order quantity EOQ and the order point we need to consider the demand lead ... View the full answer