ONLY ANSWER PART D

QUESTION 1 (35 POINTS) Powered By Koffee (PBK) is a new campus coffee store. PBK uses 50 bags of whole bean coffee every month, and you may assume that demand is perfectly steady throughout the year. PBK has signed a year-long contract to purchase its coffee from a local supplier for a price of $25 per bag and an $85 fixed cost for every delivery independent of the order size. The holding cost due to storage is $1 per bag per month. PBK managers figure their holding cost due to cost of capital is approximately 2 percent (of variable cost) per bag per month. Round your answers to two decimal places. a. [8 Points] What is the optimal order size, in bags? b. [8 Points] Given your answer in (a), how many times a year does PBK place orders? c. [8 Points) On average, how many dollars per month does PBK spend on holding coffee (including cost of capital)? d. [11 Points] Suppose that a South American import/export company has offered PBK a deal for the next year: PBK can buy a year's worth of coffee directly from South America for $20 per bag and a fixed cost for delivery of $500. Assume the estimated cost for inspection and storage is $1 per bag per month and the cost of capital is approximately 2 percent (of the cost of one bag) per month. Should PBK order from its current supplier or the South American import/export company? Quantitatively justify your