Question 1. (30 points) A local coffee roastery sells a popular coffee filter at a fairly steady rate of 380 filters per month. The roastery pays 45 cents for each filter. The purchasing cost independent of the size of the order is $8.5. The roastery uses a 25 percent annual interest rate to compute the holding costs. Stockouts of the filters is not allowed. a. Determine the optimal lot size that roastery should order and the time between order placement. b. What is the reorder point based on the on-hand inventory assuming that the lead time is 2months? What if the lead time were 3 months? c. What is the annual profit for this item if the selling price is 99 cents? (excluding the overhead and labor costs)

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