The mythical Hacker Microbrewery in Rosenheim, Germany, makes a brand of beer called Golden Eagle, which it bottles and sells in cases to adjoining pubs and stores in Rosenheim. The setup cost of brewing and bottling a batch of beer is US$1,800 per setup. The holding cost of storing a bottle of beer is US$1.50 per year. The annual demand for the Golden Eagle brand of beer is 20,000 bottles. Hacker Microbrewery brews and bottles beer at the rate of 655 bottles per day. The brewery operates 250 days per year:

1. What is the economic production quantity (EPQ)?

2. What is the average inventory level for this optimum production quantity?

3. How many production setups would there be in a year?

4. What is the optimal length of production run in days?

5. What would be the savings in annual inventory cost if setup costs can be reduced to $1,500 per setup?