3. What would be Gentle Electric's ordering rule when it begins to deal with the West Coast firm? EOQ Model would be the best to use to find the optimal order quantity that minimizes the total holding costs. EOQ will tell us when and how much to order when using the West Coast Firm. However, this new deal with West Coast creates new shipping costs which will now affect the EOQ. The new fixed rate would be $41 ($10: clerical + $15 expediting costs + $6 transportation cost + $10 LCL rate). R (Throughput or Demand/year)= 1200 (Total Annual Usage) S (Fixed Cost/order)= $41 Clerical cost per requisition= $10 Expediting cost per requisition= $15 Transportation cost= $6 LCL rate= $10 H= i*C= $112 i= 20% (Inventory carrying cost) C= $500/unit (Original transformer price) Outside Warehouse Cost= $12 EOQ (Q)= 2*R*SH = 2*1200*41112 = 29.64~30 units/order Number of Order (N)= RQ = 120030 = 40 order/year * 20 Working days/month into 240 Working days/year Time Between Order (T)= Working days/year N = 24040 = 6 days Total Cost (TC)= S * RQ+H*Q2 = 41 * 120030+100*302 = $ 3,140/year