Determine how many gallons (rounding off at two digits after the decimal point) should be ordered each time to minimize the annual total costs in the following scenario. The item cost per gallon is $5, variable costs of storing one gallon in inventory per year amount to 25% of the item cost, paperwork and shipping costs for placing an order are $10 per order, and the demand is fixed at 500 gallons per month.?
If it takes 6 days for the order placed to arrive, at what point should the product be reordered, assuming a 30-day month??