Inventory optimization We have shown for EconoFoods' milk sales that the optimal inventory policy may be described by the following expression: (picture below) Where Q is the order size, S is the annual sales, C is order cost, and the carrying cost is the inventory cost per jug per year. Now, suppose that your firm keeps a cash reserve steadily drawn down to pay bills. When it runs out, you replenish the balance by selling T-bills whose interest is 2%. Every sale of bills costs $10. Your firm pays out cash at a rate of $1,000,000 per year. If you apply the above formula, what would be the value of S? (15) Q = 2 x SxC carrying cost per jug per year $10 $1,000,000 $200,000