Open all year round except for five days off during certain holidays, a bakery (Pide Inc.) buys flour in 30 kg bags at $50 per bag from an international supplier. Pide uses an average of 60 bags of flour a month. Preparing an order, receiving the shipment, and paying the invoice cost $2,000 per order. The inventory carrying cost rate is 10%. The order delivery lead time is 25 days.

Currently, Pide places an order every month (call this policy A). Determine this policy's current order size and the total cost of operating inventory (i.e., the sum of annual ordering and carrying costs).

Pide wants to assess its current inventory cost and minimize it. Find the least-cost order size (i.e., EOQ) and its corresponding total cost of operating this inventory policy (call this policy B).

Calculate the % change in inventory operating costs between policies A and B. Which one would you recommend for Pide to implement, policy A or B? Why?