Garden Vaerity Flower shop uses 750 clay pots a month. The pots are purchased at $2 each. Annual holding costs per pot are estimated to be 30% of the cost (i.e. purchasing price), and the ordering costs are $20 per order. The shop manager has been using an order size of 1,500 pots.
a. What additional annual cost is the shop incuring by staying with this order size?
b. Other than cost savings, what benefit would using an optimal order quantity yield?