Question 1. Part I. A bakery uses a certain type of flour for their bagels at a rate of 30 bags per week. The bakery purchases each bag of flour for $7. The transportation cost and all other costs incurred by placing an order for bags of flour is $80 per order, and holding costs are based on a 10% annual interest rate. Assume each year is 50 weeks. (a) How many bags of flour should the bakery purchase at each order to minimize the total inventory costs? Compute the time between placing the orders based on this policy. (b) What are the annual holding and setup costs for this item under this policy? Part II. Suppose that even though the estimated demand was 30 per week, and optimal order quantity was obtained according to this information, it turns out that the actual demand is in fact 45 bags per week. (a) If we use the order size calculated in the previous problem, what will the setup plus holding cost be under the actual demand rate? (b) What would the cost be if we compute the new optimum order size based on the actual demand? (c) What excess cost was caused by that demand error? Question 2. The weekly demand for crabs at a restaurant is 100 units. The annual inventory carrying cost for the crab is $10 per unit. The ordering cost for one order of any size is $50, and the time between ordering and receipt is one week. At what inventory level should they place their orders? What is the optimal order quantity, and how many times a year do they need to place an order?