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Powered by Koffee (PBK) is a new campus coffee store. PBK uses 40 bags of...

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Accounting

Powered by Koffee (PBK) is a new campus coffee store. PBK uses 40 bags of whole bean coffee every month, and you may assume that demand is perfectly steady throughout the year.
PBK has signed a yearlong contract to purchase its coffee from a local supplier, Phish Roasters, for a price of $35 per bag and an $75 fixed cost for every delivery independent of the order size. The holding cost due to storage is $1 per bag per month. PBK managers figure their cost of capital is approximately 2 percent per month.
(a) What is the optimal order size, in bags? (Round the answer to 2 decimal places.)
(b) Given your answer in (a), how many times a year does PBK place orders? (Do not round intermediate calculations. Round the answer to the nearest whole number.)

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