Differential Costs of Inventory Policy: A company uses 2,700 units of Zeron per year. Each unit has an invoice cost of $222, including shipping costs. Because of the volatile nature of Zeron, it costs $860 for liability insurance on each shipment. The costs of carrying the inventory amount to $75 per item per year exclusive of a 20 percent cost of capital. Other order costs amount to $18 per order.

At present, the company orders 250 units at a time.

Required:

a. What is the annual cost of the company's current order policy?

b. What is the annual cost of the optimal economic order policy?