Madeline Thimmes’s Dream Store sells water beds and assorted supplies. Her best-selling bed has an annual demand of 400 units. Ordering cost is $40; holding cost is $5 per unit per year.
(a) To minimize the total cost, how many units should be ordered each time an order is placed?
(b) If the holding cost per unit was $6 instead of $5, what would be the optimal order quantity?