An Introduction to Management Science 13th Edition by David Anderson,Dennis Sweeney ,Thomas Williams ,Jeffrey Camm, Kipp Martin

Exercise 25

A large distributor of oil-well drilling equipment operated over the past two years with EOQ policies based on an annual holding cost rate of 22%. Under the EOQ policy, a particular product has been ordered with a Q * = 80. A recent evaluation of holding costs shows that because of an increase in the interest rate associated with bank loans, the annual holding cost rate should be 27%.
a. What is the new economic order quantity for the product?
b. Develop a general expression showing how the economic order quantity changes which the annual holding cost rate is changed from I to I ?.