A food processor uses approximately 27,000 non-returnable glass jars a month for its fruit juice product. Because of storage limitations, a lot size of 4,000 jars has been used. Monthly holding cost is one cent per jar, and ordering cost is $20 per order.
a, What penalty is the company incurring by using its present order quantity'?
b. The manager would like to justify the present order quantity. One possibility is to simplify order processing to reduce the ordering cost. What ordering cost would enable the manager to justify the current order quantity?