EOQ and cost of inventory Dayle Company's deluxe cordless telephone sells for $79.95 and costs $40 each. Last year the company sold 85,000 units. The supplier recently announced a price increase of $5 per unit, and management of Dayle estimates that as a result of a selling price increase to $89.95, the demand for the telephone this year will decline 10 percent. It costs $400 to place an order and the carrying cost of the deluxe telephones is 12 percent of cost. The supplier has indicated that due to increased processing costs, it will accept orders only in round lots of 1,000 units at the $45 price. An additional charge of $50 per order is made on any fractional orders.

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REQUIRED a. Compute the economic order quantity. b. Compute the total cost of inventory if the EOQ is ordered. c. Compute the total cost of inventory if each order is rounded to the nearest lot of 1,000 units. d. What order size should the company place?