Effect of different order quantities on ordering costs and carrying costs, EOQ. Soothing Meadow, a retailer of bed and bath linen, sells 380,000 packages of Mona Lisa designer sheets each year. Soothing Meadow incurs an ordering cost of $57 per purchase order placed with Mona Lisa Enterprises and an annual carrying cost of $12.00 per package. Liv Carrol, purchasing manager at Soothing Meadow, seeks your help: She wants to understand how ordering and carrying costs vary with order quantity.

Required1. Complete the table for Liv Carrol. What is the EOQ? Comment on your results.2. Mona Lisa is about to introduce a Web-based ordering system for its customers. Liv Carrol estimates that Soothing Meadow's ordering costs will reduce to $30 per purchase order. Calculate the new EOQ and the new annual relevant costs of ordering and carrying inventory.3. Liv Carrol estimates that Soothing Meadow will incur a cost of $2,150 to train its two purchasing assistants to use the new Mona Lisa system. Will Soothing Meadow recoup its training costs within the first year ofadoption?

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Scenario 1 2 5 3 4 Annual demand (packages) Cost per purchase order Carrying cost per package per year Quantity (packages) per purchase order Number of purchase orders per year Annual relevant ordering costs Annual relevant carrying costs Annual relevant total costs of ordering and carrying inventory 380,000 57 $ 12.00 380,000 57 380,000 57 380,000 57 $ 12.00 380,000 57 2$ $ 12.00 4,750 $ 12.00 1,000 $ 12.00 760 1,900 3,800