Consider a Basic Economic Order Quantity (EOQ) Model with the Following

Essay

Consider a basic economic order quantity (EOQ) model with the following characteristics:
$\begin{array}{ll}\text { Item cost: } & \$ 15 . \\\text { Item selling price: } & \$ 20 .\\\text { Monthly demand: } &500 \text { units (constant) }\\\text { Annual holding cost: } & 9 \% \text { of purchase cost }\\\text { Cost per order: }& \$ 18\\\text { Order lead time: } & 5 \text { days } \\\text { Firm's work year: } & 300 \text { days ( } 50 \text { weeks } @ 6 \text { days per week) } \\\text { Safety stock: } & 15 \% \text { of monthly demand }\end{array}$

For this problem, determine the values of:
A.Q* the optimal order quantity.
B.R, the reorder point.
C.T, the cycle time.
D.M, the maximum quantity in inventory.
E.Total annual inventory cost.
F.Suppose the vendor demands purchases in multiples of 500 only.
What is the increase in total annual inventory cost that this causes?