Question $2,C_h=27\%2\mathrm{.}50-$ Camying cost.

The soft goods department of a large department store sells $175$ units per month of a certain large bath towel. The unit cost of a towel to the store is $$2\mathrm{.}50$ and the cost of placing an order has been estimated to be $$12\mathrm{.}00.$ The store uses an inventory carrying charge of $27\%$ per year.

Required :

a$.)$ Determine the optimal order quantity, order frequency, and the annual cost of inventory management.

$[5$ marks$]$

b$.)$ If$,$ through automation of the purchasing process, the ordering cost can be cut to $$4\mathrm{.}00,$ what will be the new economic order quantity, order frequency, and annual inventory management cost? Explain these results.

$[5$ marks$]$

Question $2.$