Krugstan Products Ltd. is involved in the production of automobile parts and has the following inventory, carrying, and storage costs:

A. Orders must be placed in round lots of 150 units.

B. Annual unit usage is 350,000. (Assume a 50-week year in your calculations.)

C. The carrying cost is 15 percent of the purchase price.

D. The purchase price is $15 per unit.

E. The ordering cost is $150 per order.

F. The desired safety stock level is 7,500 units. (This does not include delivery-time stock.)

G. The delivery time is 1 week.

Given the foregoing information:

a. Determine the optimal EOQ level.

b. How many orders will be placed annually?

c. What is the inventory order point? (That is, at what level of inventory should a new order be placed?)

d. What is the average inventory level?

e. What would happen to the EOQ if annual sales doubled (all other unit costs and safety stocks remain constant)? What is the elasticity of EOQ with respect to sales? (That is, percentage change in EOQ divided by the percentage change in sales?)

f. If carrying costs double, what will happen to the EOQ level? (Assume the original sales level of 350,000 units.) What is the elasticity of EOQ with respect to carrying costs?

g. If the order costs double, what will happen to the level of EOQ? (Again, assume original levels of sales and carrying costs.) What is the elasticity of EOQ with respect to ordering costs?

h. If the selling prices double, what will happen to EOQ?

What is the elasticity of EOQ with respect to selling price?