Demand for a cleaning item at a retailer is 1000 units per year. A processing fee of $10 will be charged for each order placed. The annual cost to carry an item in inventory is 20% of the item costs. The supplier of this cleaning item offers the following price schedule to the retailer of his item:

Order size           1-299     300+

Purchasing price               $20         $19

1. What are the retailer's optimal order quantity and the total annual costs?

2. The retailer opens 250 days a year. What is the average number of days between two consecutive orders (using the order quantity you got from Question 1)?