A food processor uses approximately 27,000 glass jars a monthfor its fruit juice product. Because of storage limitations, a lotsize of 4,000 jars has been used. Monthly holding cost is 18 centsper jar, and reordering cost is $ 60 per order. The company operates an average of 20 days a month.
a) What penalty is the company incurring by its present ordersize?
b) The manager would prefer ordering 10 times each month but wouldhave to justify any change in order size. One possibility is tosimplify order processing to reduce the ordering cost. Whatordering cost would enable the manager to justify ordering everyother day?
c) Suppose that after investigating ordering cost, the manager isable to reduce it to $ 50. How else could the manager justify usingan order size that could be consistent with ordering every otherday?