One representation of the EOQ inventory modes is:

Q =)2 CoA CH Where Q = EOO Co = Cost of placing an order A = Annual demand in units CH = Cost of holding one unit in stock for one year 121 Data relevant to component K used by Engineering P1 C in 22 different assemblies and to the company include:
Purchase price Annual wage Cost of buying office:
Fixed Variable Rent on component's store Heating Interest Insurance, based on total purchases Deterioration, as % of all items purchased REQUIRED

(a) Calculate the EOQ for component K $15 per 100 100000 units $15 575 per annum $12 per order $per annum 3000 700 %per annum 25.00 0.00 1.00

(b) Calculate the percentage change in total annual variable cost relating to component K if the annual usage was (i) 125000 units; (ii) 75000 units

(c) Use these figures to comment on the sensitivity of the EOQ to changes in annual usage ICMA, PS, Part I, Quantitative Techniques, May 1982.