Joe Birra needs to purchase malt for his microbrewery production. His supplier charges $35 per delivery (no matter how much is delivered) and $1.20 per gallon. Joe's annual holding cost per unit is 35 percent of the price per gallon. Joe uses 250 gallons of malt per week.
- If Joe's supplier only accepts orders that are an integer multiple of 1000 gallons, how much should Joe order to minimize ordering and holding costs per gallon?
- Joe's supplier offers a 3 percent discount if Joe is willing to purchase 8000 gallons or more. What would Joe's total annual cost (purchasing, ordering, and holding) be if he were to take advantage of the discount?