Question

Carlson Limited uses 12,000 units of part CRF-2 each year. To improve control over its inventories,...

Carlson Limited uses 12,000 units of part CRF-2 each year. To improve control over its inventories, the company wants to calculate the EOQ for this part.


Required:
1. The company has determined that the cost to place an order for the part is $15, and it has determined that the cost to carry one part in inventory for one year is $1.00. Compute the EOQ for the part.

2. Assume that the cost to place an order decreases from $15 to $12 per order. Will the EOQ increase or decrease? Calculate the new EOQ. (Round your answers to the nearest whole number.)


3. Assume that the cost to carry a part in inventory decreases from $1.00 to $0.80 per part. (Ordering costs remain unchanged at $15 per order.) What will be the effect on the EOQ? Show computations. (Round your answers to the nearest whole number.)

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