Demand for grapefruit from a wholesaler is 3800 tons per year. Grapefruit is purchased from a distributer and the price is 950 liras per ton. However, the distributor offers the following discount: If the wholesaler agrees to buy more than 300 tons for each order the surplus quantity is priced at 900 liras per ton (the price of the initial 300 tons is still 950 liras per ton). For each order there is a fixed cost of 2500 liras and inventory holding cost is evaluated with an interest rate of 35%.

a) What is going to be the optimal order quantity and the optimal annual cost for the wholesaler.
b) How do you think the shelf life of grapefruit will have an effect on the optimal policy determined in part-(a). Can you suggest an alternative inventory policy if necessary. What is the annual cost of this alternative policy.