1.) Kelvin Shoe Stores carries a basic black dress shoe for men that sells at a rate of 500 each quarter.  Their current policy is to order 500 per quarter, with a fixed cost of $30/order.  The annual holding cost is 20% of the cost of items held.  The following cost structure is applicable:

Order Quantity                Price/pair

0-125                              $35

126-225                            34

226-350                            33

351 +                                32

For a price of $35, the optimal order quantity (ignoring the price breaks) is ___________.  (4)

2.) Redo #1 if they allow backordered items with a shortage cost of $4/year.

Optimal order quantity = ___________.  (4)