A food processor uses approximately 100,000 glass jars a year for fruit juice product. Annual holding cost is 40 cents per jar, and reordering cost is $128 per order. Because of storage limitations, a lot size of 4,000 jars has been used.
a) What penalty is the company incurring per year because of its storage limitation?
b) The storage limitation has been resolved, but the manager would prefer ordering 20 times each year but would have to justify any change in order size. One possibility is to simplify order processing to reduce the ordering cost. What ordering cost would enable the manager to justify ordering 20 times a year? Please be elaborate in answer/explanation.