The Ohio Electric generating plant in Cincinnati buys coal to generate electricty. Coal is supplied by rail cars at the rate of 9,000 tons per day at a price of $16.50 per ton and is used at a rate of 1,400 tons per day. The plant operates 365 days per year, and its annual carrying cost for the coal is 28% of the average value of its inventory of coal. The ordering cost for a shipment of coal is $675. Ohio Electric would like to use the EOQ (Economic Ordering Quantity) model.
a. What quantity of coal should Ohio Electric order each time it places an order?
b. What is the annual TSC (Total Annual Stocking Cost) that Ohio Electric should expect?
c. How many days should it take to receive one shipment after it starts arriving?
d. What is the maximum inventory level of coal that should be expected?