Question $3$:

Henry Crouch's law office has traditionally ordered ink refills $60$ units at a time. The firm estimates that carrying cost is $40\%$ of the $$10$ unit cost and that annual demand is about $240$ units per year. The assumptions of the basic EOQ model are thought to apply.

a$)$ For what value of ordering cost would its action be optimal?

b$)$ If the true ordering cost turns out to be much greater than your answer to part a$,$ what is the impact on the firm's ordering policy?