A large distributor of oil-well drilling equipment operated over
the past two years with EOQ policies...
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Finance
A large distributor of oil-well drilling equipment operated overthe past two years with EOQ policies based on an annual holdingcost rate of 28%. Under the EOQ policy, a particular product hasbeen ordered with a Q* = 120. A recent evaluation ofholding costs shows that because of an increase in the interestrate associated with bank loans, the annual holding cost rateshould be 31%.
Develop a general expression showing how the economic orderquantity changes when the annual holding cost rate is changed fromI to I'. Choose the correct answer below.
(i)
(ii)
(iii)
(iv)
Model (iii)
Model (i)
Model (ii)
Model (iii)
Model (iv)
Using the formula you derived in part a,compute the new economic order quantity for the product. Round youranswer to the nearest whole number.
The revised order quantity Q* for the new carrying chargeI' is, Q' = .
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