A medical supply distributor imports N95 masks from a supplier in Asia. The monthly demand is stable and is 120,000 boxes per month. A box costs $7 including shipping but placing an order costs $450. Holding cost is $1.2 per box per year. The distributor can also produce the masks in her warehouse up to 200,000 boxes per month. The manufacturing cost per box is $5.0 and the inventory holding cost is $0.72 per box per year. Production setup cost is $800 per production run. Currently, the warehouse has a capacity to accommodate a maximum of 10,000 boxes in the inventory; however, the warehouse can easily extend this capacity to 80,000 boxes (by leasing another warehouse) at a cost of $1,200 per year. Propose the most economical recommendation with justification. (There are copy-pasted answers for this question all over chegg, please don't copy it I already have that but there are parts that are not clear in that answer) here is my question: For the first case: buying from the supplier, I can find the EOQ (= 32864) and case Total cost =10119436 I also can find case 2 (production) EPQ which is 35773 but after this part I'm a bit confused. Since my EPQ is 35773 and the warehouse has a capacity of 10000. Should I calculate the TC for 10000 using the formula TC=10000/2*H+D/Q(s) and then add the cost of the leased warehouse which is 1200. I know H is the annual cost per unit, but here we have to pay 1200 anyways. Could you please clarify this part specifically?