Each month, a gas station sells 4,000 gallons of gasoline.

Each time the parent company refills the station’s tanks, it charges the station $50 plus 70¢, per gallon. The annual cost of holding a gallon of gasoline is 30¢.

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a How large should the station’s orders be?

b How many orders per year will be placed?

c How long will it be between orders?

d Would the EOQ assumptions be satisfied in this situation? Why or why not?

e If the lead time is two weeks, what is the reorder point? If the lead time is ten weeks, what is the reorder point? Assume 1 week  year.


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