The catering manager of La Vista Hotel, Lisa Ferguson, is disturbed by the amount of silverware she is losing every week. Last Friday night, when her crew tried to set up for a banquet for 500 people, they did not have enough knives. She decides she needs to order some more silverware, but wants to take advantage of any quantity discounts her vendor will offer:
Lisa's order costs are $200 per order, her annual holding costs are 5%, and the annual demand is 45,000 pieces. For the best option:
(a) What is the optimal order quantity when Lisa purchases more than 10,001 pieces?
(b) What is the total annual cost, including ordering, holding, and purchasing the silverware