Shoe Shine is a local retail shoe store located on the north side of Centerville. Annual demand for a popular sandal is 500 pairs, and John Dirk, the owner of Shoe Shine, has been in the habit of ordering 100 pairs at a time. John estimates that the ordering cost is $10 per order. The cost of the sandal is $5 per pair.
For John's ordering policy to be correct, what would the carrying cost as a percentage of the unit cost have to be? If the carrying cost were 10% of the cost, what would the optimal order quantity be?