A food processor employs approximately 27,000 glass jars a month for its fruit juice product. Due to storage limitations, a lot size of 4,000 jars has been used. Monthly holding cost is 18 cents for each jar, and reordering cost is $60 for each order.
a. What penalty is the company incurring by its present order size?
b. The manager would prefer ordering 10 times each month 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 10 times a month?