2- Suppose that Extended Play Stereo opens a second outlet but continues to use one central purchasing location. The holding cost, order cost, and item cost remain the same as in problem 1, but the annual demand doubles to 1,500 units per year.

a. What will be the new EOQ? How much has it increased from the EOQ of problem 1?

b. How much will the company spend each year to order and hold this model of amplifier with the higher level of demand?

c. Do economies of scale apply to inventory under some conditions?