Hartley Incorporated buys plastic resin by the ton and then packages and distributes it in smaller amounts to industrial users. The resin typically costs $50 per ton, and Hartley uses 80,000 tons each year. Placing an order for more resin costs $500 in allocated labor cost for purchasing personnel. Holding costs for the resin are estimated at 1 percent of the product value each month. Hartley operates 365 days a year.
a. How much resin should Hartley order each time?
b. What will be the average inventory and annual holding cost? Discuss.