Error in carrying cost estimate Flying Digits Inc. sells personal computers. It estimates the demand for its computers at 1,200 units and inventory carrying costs at 12 percent of cost. Each computer costs $1,500. Ordering costs are $750 per order. Actual inventory carrying cost is 18 percent of product cost.

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REQUIRED a. Compute the EOQ with carrying costs of 12 percent and 18 percent. b. Determine the cost of estimating carrying cost incorrectly.