We need to plan purchases of a new item. Based on some study, the item will likely have a price of about $200 each. We expect to use about 20 of these a month. They are rather bulky so that holding the costs about 20 percent of their price per year. In order to buy them, the cost to make a purchase is about $100.

a. What is the least costly inventory policy? That is, how many should we buy at a time?

b. How often will we need to make a purchase?