Effect of estimation errors Francine Company sells executive furniture in a large metro- politan area. The company estimates that demand for its Loafwell model executive chair is 3,000 units per year and carrying cost is 12 percent of unit cost. Each chair costs $1,800. Ordering cost is $600. Actual demand for the chairs is 2,600 units and actual carrying cost is 16 percent of unit cost.

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REQUIRED a. Compute the EOQ with management's estimates and also for actual data. b. Determine the cost of management's estimation errors.