Question: Problem 5. (15 pts) Use EOQ model to solve following problem. The item is demanded 50 weeks a year. Item cost: $10 Fixed Order cost:

Problem 5. (15 pts) Use EOQ model to solve following problem. The item is demanded 50 weeks a year.

Item cost: $10

Fixed Order cost: $250

Annual holding cost: 25% of item cost

Average demand: 500 per week, constant rate

a. Calculate the optimal order quantity and the total inventory cost.

b. If your purchase quantity is equal to or above 3000, the fixed ordering cost is reduced to $200. Would you take advantage of it? How much would you save annually?

c. If your purchase quantity is equal to or above 3000, the item cost is reduced to $8. Would you take advantage of it? How much would you save annually?

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