Problem:
The Gentry Garden Center sells 90,000 bags of lawn fertilizer annually. The optimal safety stock (which is on hand initially) is 1,000 bags. Each bag costs the firm $1.50, inventory carrying costs are 20%, and the cost of placing an order with its supplier is $15.
Required:
Question 1: What is the Economic Ordering Quantity?
Question 2: What is the maximum inventory of fertilizer?
Question 3: What will be the firm's average inventory?
Question 4: How often must the company order?
Note: Show supporting computations in good form.