The seasonal nature of milk production and fluid consumption necessitates maintaining seasonal and operating reserves to ensure fluid demand is satisfied. Operating reserves are maintained at a certain percentage of fluid milk needs to satisfy day-today fluctuation in demand. Seasonal reserves vary month to month depending on production and consumption level. Manufacturing plants incur higher costs because of the fluctuating reserve milk volume. The costs of balancing reserve milk supplies are estimated using two scenarios. One assumes the volume of operating reserves is 10 percent of fluid demand, and the other, 20 percent.