The Deer Valley Farm produces a natural organic fertilizer, which it sells mostly to gardeners and homeowners. The annual demand for fertilizer is 220,000 pounds. The farm is able to produce 305,000 pounds annually. The cost to transport the fertilizer from the plant to the farm is $620 per load. The annual carrying cost is $0.12 per pound.
a. Compute the optimal order size, the maximum inventory level, and the total minimum cost.
b. If the farm can increase production capacity to 360,000 pounds per year, will it reduce total inventory cost?