Error in demand estimate Aladdin Carpets sells Oriental carpets. It estimates the de- mand for its carpets at 900 units. Each carpet costs $1,500 and has a carrying cost of 18 percent of cost. Ordering costs are $800. The store may experience demand as much as 100 carpets above or below estimated demand.

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REQUIRED a. Compute the EOQ for demand of 1,000 and 900 carpets. b. Determine the cost of estimating demand incorrectly if actual demand is 1,000 units. Computer requirement c. The investment value of oriental carpets has been receiving a lot of treatment in the press lately. Management is unsure of the impact of this publicity on expected sales. Compute EOQs for demand levels of 600 units through 2,000 units in increments of 100 units.