Answers for 1 is provided, only solve problem 2:

A specialty coffee house sells Colombian coffee at a steady rate of 7,000 pounds annually. The beans are purchased from a local supplier for $2.60 per pound. The coffee house estimates that it costs them $70 in paperwork and labor to place an order for the coffee. Holding costs are based on a 28% annual rate. (Show your calculations for all questions):

The optimal order quantity for coffee is 1870.83 pounds. The time between placement of orders is 0.27 years, or 3.19 months. The average annual inventory holding cost is $261.92. The average annual ordering cost is $261.92.

Problem 2 (Show your calculations for all questions): Suppose the coffee from the above problem has a shelf life of 1 month. a. How often should orders be placed? b. What quantity should be ordered given the answer in part a? c. How much would this coffee house be willing to pay for a vacuum freezer that would store the coffee for up to 2 months? d. How about if it would keep the coffee for up to 4 months?