Refer to Fig. 6. Suppose that (i) the ordering cost for each delivery of dried cherries is $50, and (ii) it costs $7 to carry 1 pound of dried cherries in inventory for 1 year.

(a) What is the inventory cost (carrying cost plus ordering cost) if carrying costs are computed on the average inventory during the order–reorder period?

(b) What is the inventory cost if carrying costs are computed on the maximum inventory during the order–reorder period?

Inventory (in pounds) 180 0 Figure 6 1st order arrives End of year T