Dominic’s supermarket chain sells Nut Flakes, a popular cereal
manufactured by the Tastee cereal company. Demand for Nut Flakes is
1,000 boxes per week. Dominick’s has a holding cost of 25 percent
and incurs a fixed trucking cost of $200 for each replenishment
order it places with Tastee.

(a) Given that Tastee normally charges $2 per box of Nut Flakes,
how much should Dominick’s order in each replenishment lot?

(b) Tastee runs a trade promotion, lowering the price of Nut
Flakes to $1.80 for a month. How much should Dominick’s order be,
given the short-term price reduction?