Question: Please answer these questions with details. QUESTION 5 (20 marks) The expected sales of Cool Ltd. is 22,500 units a year, carrying costs of RM1.50

Please answer these questions with details.

QUESTION 5 (20 marks) The expected sales of Cool Ltd. is 22,500 units a year, carrying costs of RM1.50 per unit, and an ordering cost of RM3 per order. Compute the economic order quantity, average inventory and total carrying cost. Explain what does the EOQ formula tell us and what assumption can be made about the usage rate for inventory. If an additional 30 units of inventory will be required as safety stock. Compute the new average inventory and the new total carrying cost, Discuss, why might a firm keep a safety stock? What effect is it likely to have on carrying cost of inventory? (20 marks)

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