A wine importer sells on average 90 cases a week of a particular wine. The importer currently buys the wine at a cost of $78 per case. The importer's cost of capital is 25% per year. Each order winery costs the importer $750. This cost includes labor, forms, record keeping for tax purpose winery pays for shipping.)

a) What order quantity minimizes the importer's total inventory-related costs (i.e., holding andordering costs)? What are the importer's annual inventory-related costs given this order quantity (Assume a 52-week year.)

b) The winery is offering a new quantity discount program. It is willing to give a 2% quantity discount off the purchase price if the importer orders 1200 cases or more at a time. (Note that this will be an ongoing program and not a one-time discount.) Suppose the importer chooses to participate in the quantity discount program and tries to minimize its inventory-related costs while ordering enough to qualify for the discount. What would its annual inventory-related costs be? Should the importer participate in the quantity discount program?