Better Meds Ltd. is a large pharmaceutical distributor of medicines in Australia. The management is reviewing the company's inventory ordering and storage process for a special medicine, Proton X, which requires a special refrigeration facility with precise temperature controls to carry this product in large quantities. You are aware that the incremental cost of ordering and receiving Proton X is $3600 per order. The annual cost of storing the product is $8 per unit. The company has a planned purchase quantity of 250,000 units per year. Frequent power outages in recent years have caused a significant amount of product spoilage. Given the supplier is locally adjacent, management has enquired about the possibility of implementing a Just in Time (JIT) system as the real cost of carrying and storing has increased significantly due to the product spoilage.

Required:

1. Calculate the optimal order quantity using the EOQ formula (2 marks)

2. Calculate the total cost of ordering and storing without considering product spoilage. (1 mark)

3. Discuss two key requirements for the successful implementation of a JIT system and two consequences of an improperly designed JIT system in the context of the information provided in the question. (4 marks)