A school sees a constant demand rate of 80 boxes of pens per month. The fixed cost of placing an order is $15, and the holding cost for a box is $2 per year. Answer the following questions.

1. What is the minimum total annual cost that this school can achieve? (5 marks)

2. Suppose later when the school places orders according to the original EOQ, it turns out that the fixed cost of placing an order is $20. How will the wrong estimation of fixed cost aspect the total annual cost? (5 marks)