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Part 1

EOQ analysisTiger Corporation purchases

1,170,000

units per year of one component. The fixed cost per order is

$22.

The annual carrying cost of the item is

27.7%

of its

$2.39

cost.a. Determine the EOQ if (1) the conditions stated above hold, (2) the order cost is zero rather than

$22,

and (3) the order cost is

$22

but the carrying cost is

$0.01.

b.What do your answers illustrate about the EOQ model? Explain.

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Part 1

a. (1) If there are no changes in the costs, the EOQ is

enter your response here

units.(Round to the nearest integer. For infinity, input INF)

Part 2

(2) If the fixed cost per order is $0, the EOQ is

enter your response here

units.(Round to the nearest integer. For infinity, input INF)

Part 3

(3) If the annual carrying cost of the item is

$0.01,

the EOQ is

enter your response here

units.(Round to the nearest integer. For infinity, input INF)

Part 4

b.Is the following statement about the EOQ model true or false?

False

True

. (Select from the drop-down menu.)"The EOQ model is not useful when ordering costs are zero. As shown in part

a,

when the fixed cost per order is zero the model is not realistic. With zero ordering costs the firm is shown to never place an order."

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