Louisiana oil refining buys crude oil on a long-term supply, Ask an Expert

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Louisiana Oil Refining buys crude oil on a long-term supply contract for $38 per barrel. When shipments of crude oil are made to the refinery, they arrive at the rate of 12,000 barrel per day. Louisiana Oil uses the oil at a rate of 5,000 barrels per day and plans to purchase 600,000 barrels of crude oil next year. If the carrying cost is 30 percent of acquisition cost per unit per year and the ordering cost is $11,600 per order:

a. What is the EOQ for the crude oil?

b. What is the Total Cost at the EOQ?

c. How many days’ worth demand are supported by each order of crude oil?

d. How much needed storage capacity is expected for the crude oil?

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Operation Management, Management Studies

Category:- Operation Management
Reference No.:- M91627907

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