Problem 12-5 (Algo)Garden Varlety Flower Shop uses 810 clay pots a month. The pots are purchased at $3.30 each. Annual carrying costs per pot areestimated to be 20 percent of cost, and ordering costs are $15 per order. The manager has been using an order size of 1,750 flowerpots.a.What additional annual cost is the shop incurring by staying with this order size? (Round your optimal order quantity to the nearestwhole number. Round all other intermediate calculations and your final answer to 2 decimal places.)Additional annual costb.Other than cost savings, what benefit would using the optimal order quantity yield (relative to the order size of 1,750)? (Use therounded order quantity from Part a. Round your final answer to the nearest whole percent.)About% of the storage space would be needed.

Given data Monthly Demand (d) = 810 clay pots Annual demand (D) = Monthly Demand× No. of months in a year = 810×12 = 9,720 units Cost of clay pots (C) = $3.30/potAnnual Carrying costs (Cc) = 20%of cost = 20% of $3.30 = $0.66 Ordering costs (Co) = $15/order Current order size or quantity= 1750 flower potsSolution: Part (a): First we determine the EOQ Q=2×D×CoCc =2× 9720×150.66 =441818.1818 Q = 664.6941 ≈ 665 (Rounding off to the nearest whole number) Optimal Order Quantity (Q) = 665 units Now determine the Current total cost: Total cost (Current) = Annual carrying costs + Annual ordering costs = Current order quantity2×Ch+ DCurrent order Quantity×Co = 17502×0.66+ 9720 1750×15 = $(577.50 + 83.31) = $660.81( rounding 2 decimal places) Then determine the New total cost: Total cost (New) = Annual carrying costs + Annual ordering costs = Q2×Ch+ DQ×Co = 6652×0.66+ 9720 665×15 =(219.45 + 219.24)= $438.69 (rounding 2 decimal place) The additional annual cost at the current order size: Additional annual cost = Current cost - New cost = $660.81 - $438.69 == $222.12 Part (b) Storage space is calculated as, Storage space =Optimal order quantity Current Order quantity× 100 Storage space = 665 1750 × 100 Storage space = 38%About 38% of the storage space would be needed.