Problem 1: The annual requirement of a part is 360,000 units. The order cost is $120 per order, the holding rate is 12 percent and the part cost is $2,500 per unit. What are the (a) EOQ, (b) annual holding cost. (c) annual order cost, and (d) total annual inventory cost?
Problem 2: If the company above decided to order at a lot size of 2,800 units instead of the E00 quantity, what are the (at) annual holding cost, (b) annual order cost, and (c) total annual inventory cost? What can you conclude about these costs compared to ordering the ECG quantity?