4. The annual demand for a particular drug is 1,800 tablets. The purchase price of a tablet is $20. The holding cost per unit per year is 25% of the item’s price, and the cost of placing an order is $30. The pharmacist orders the drug in quantities of 200.

Demand is known and constant.

a. Determine the optimal order quantity.

b. Determine the total annual ordering and holding costs for the quantity determined in part a.

c. Determine the total annual cost associated with the quantity ordered by the pharmacist. Which cost (holding or ordering) is higher and why?

d. If the pharmacist used the EOQ, how many orders per year would be placed on average? What would the length of an order cycle (time between two consecutive orders) be, assuming 300 work days in a year?