Green Thumb Garden Centers sells 100,000 bags of lawn fertilizer annually. The optimal safety stock (which is on hand initially) is 1,200 bags. Each bag costs Green Thumb $4, inventory carrying costs are 20 percent, and the cost of placing an order with its supplier is $25.
a. What is the EOQ?
b. What is the total inventory cost at the EOQ level?
c. What is the maximum inventory that exists after an order is received?
d. What will Green Thumb’s average inventory be?
e. How often must the company order?