Take another look at Example 30.1. Suppose a rise in interest rates increases carrying cost per ton from $55 to $75. What is the effect on economic order quantity?

Data from Example 30.1

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FIGURE 30.2 INN A simple inventory rule. The company waits until inventories of materials are about to be exhausted and then reorders a constant quantity. 5 6 3 4 Time 300 250 200 FIGURE 30.3 As the inventory order size is increased, order costs fall and inventory carrying costs rise. Total costs are minimized when the saving in order costs is equal to the increase in carrying costs. 150 Optimal order size 100 Total costs 50 Carrying costs BEYOND THE PAGE 500 Try It! Figure 30.3: Order costs Akron's inventory 3,700 4,100 2,500 costs mhhe.com/brealey13e Order size, tons 4,500 4,900 3,300 006'7 2,100 00L'L 00E'L 006 Costs, $ thousands