Management at Admore Farm and Seed has never analyzed the costs associated with their inventory policy, and they currently have a large stock of insecticide in the warehouse. They estimate that it costs $25 to place an order, and it costs $0.25 per gallon to hold the spray. The firm requires 80,000 gallons for the year (assume 365 days). (EOQ- Economic order quantity)
a. Calculate the EOQ
b. Calculate the total cost of inventory implied by the EOQ from a.
c. Calculate the total cost of inventory at the EOQ ± 1,000 gallons
d. If it takes 7 days to receive an order from suppliers, determine the appropriate reorder point.