The Talbot Company uses electrical assemblies to produce an array of small appliances. One of its high cost / high volume assemblies, the XO-01, has an estimated annual demand of 8,000 units. Talbot estimates the cost to place an order is $50, and the holding cost for each assembly is $20 per year. Talbot currently uses a fixed order quantity of 400 units.

If Talbot switched to the EOQ as the order quantity, which of the following statements is true?

Formulas:

begin mathsize 12px style E O Q equals square root of fraction numerator 2 D S over denominator H end fraction end root semicolon space space space space space T C equals Q over 2 H space plus D over Q S semicolon space space space space space space R equals d with bar on top L space plus z sigma subscript t square root of L end style

The sum of the annual ordering cost and holding cost would increase.

The annual ordering cost would decrease.

The annual holding cost would decrease.

There will be no change in the costs.