question archive A firm is trying to decide how much of a particular liquid should be ordered

A firm is trying to decide how much of a particular liquid should be ordered

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A firm is trying to decide how much of a particular liquid should be ordered. The liquid is kept in a storage tank; there are separate inflow and outflow pipes for the tank. The firm uses 500 gallons of liquid per day. When an order is placed with the supplier of the liquid, the truck arrives 7 days later to pump liquid into the tank. Because of the small size of the input pipe, only 2500 gallons per day can be pumped into the tank. The fixed costs of placing an order are 500$ per order. Carrying costs are 20% per year, and each gallon of liquids cost 10$. The firm keeps a safety stock of 1000 gallons of liquid on hand at all times. use a 360 day year.

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

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