The Olde Town Microbrewery makes Townside beer, which it bottles and sells in its adjoining restaurant and by the case. It costs $1700 to set up, brew, and bottle a batch of the beer. The annual cost to store the beer in inventory is $1.25 per bottle. The annual demand for the beer is 21,000 bottles and the brewery has the capacity to produce 30,000 bottles annually.
a. Determine the optimal order quantity, total annual inventory cost, the number of production runs per year, and the maximum inventory level.
b. If the microbrewery has only enough storage space to hold a maximum of 2500 bottles of beer in inventory, how will that affect total inventory costs?