Quarter-inch stainless-steel bolts 1 ½ inches long are consumed in a factory at a fairly steady rate of 60 per week. The bolts cost the plant 2 cents each. It cost the plant $12 to initiate an order, and holding costs are based on an annual interest rate of 25 percent.
a. Determine the optimal number of bolts for the plant to purchase and the time between placement orders.
b. What is the yearly holding and setup cost for this item?