Literati Bookstore sells 5 copies of Undaunted Courage per month. The sales price is $15, and each book costs Literati $7. It costs $5 to place each order, and every month they hold a copy of the book, it costs $0.25. They can only order in integer quantities.
Part A) Using the basic EOQ model, what is the optimal order quantity and average monthly total cost? What is the cycle length? Note: please include the variable costs in the total cost.
Part B) If space became more limited and the holding cost increased to $0.50 per month, what would be the new optimal order quantity and average monthly total cost? Please give a brief (1-2 sentence) explanation for why the cycle length would be longer or shorter than in Part A.