You manage inventory for a product with monthly demand of 280 units. The fixed order cost is $300 and the variable order cost is $5 per unit. The holding cost rate is $1 per unit per month.

a) What is the economic order quantity?

b) How often should you place an order?

c) Now suppose you can only order at the beginning of every month, and you round your optimal order cycle to the nearest integer. How often do you order now? By how much does your operational cost increase?

d) Is the rounding policy from (c) the best possible? If so, justify your answer; if not, propose a better order cycle, and compute the new increase in operational costs.

e) Under the rounding policy from (d), what is the total cost increase in relative terms (i.e. as a percentage of the total cost using the EOQ)?