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A store sells a brand of olive oil of 400 bottles per month. The cost of each bottle is $4.85 , and the cost of placing an order is $10.00. Assuming the holding costs are based on a 20% annual interest rate, and stock-outs are not allowed,
a) What is the optimal lot size they should order and what is the time between orders of this product?
b) If lead time is 2 weeks to get the product to the store, what is the reorder point based on the on-hand inventory?
c) If it sells for $5.99, what is the annual profit (excluding overhead and labor costs) from this item?
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