Explore BrainMass
Share

Explore BrainMass

    optimal quantity of coal to receive in each order

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    The purchasing manager for the Atlantic Steel Company must determine a policy for ordering coal to operate 12 converters. Each converter requires exactly 5 tons of coal per day to operate, and the firm operates 360 days per year. The purchasing manager has determined that the ordering cost is $80 per order and the cost of holding coal is 20% of the average dollar value of inventory held. The purchasing manager has negotiated a contract to obtain the coal for $12 per ton for the coming year.

    a. Determine the optimal quantity of coal to receive in each order.
    b. Determine the total inventory-related costs associated with the optimal ordering policy (do not include the cost of the coal).
    c. If 5 days of lead time are required to receive an order of coal, how much coal should be on hand when an order is placed?

    © BrainMass Inc. brainmass.com October 10, 2019, 1:49 am ad1c9bdddf
    https://brainmass.com/math/optimization/optimal-quantity-coal-receive-each-order-350801

    Solution Summary

    Determine the optimal quantity of coal to receive in each order. Determine the total inventory-related costs associated with the optimal ordering policy (do not include the cost of the coal). If 5 days of lead time are required to receive an order of coal, how much coal should be on hand when an order is placed?

    $2.19