Brain has been in the business of distributorship for industrial grade cleaning detergents since 2020. One of the top selling products is CleanMax101. Its average annual demand is 3000 bottles. He has been sourcing the product from the supplier in Thailand, and the supplier imposes an ordering cost of S$100 per order. The annual inventory holding cost is estimated at $15 per bottle. Recently, Brian is considering adopting the EOQ model in managing the inventory of CleanMax101 with the intention to bring the cost of inventory as low as possible.

2 a) In order to use the EOQ model to manage the inventory of CleanMax101, suggest TWO assumptions he should make? (4 marks)

2 b) Use the information given in the scenario, assist Brain in working out the optimal order quantityby using EOQ model. Show your workings. (2 marks)

2 c) If Brain decides to order the optimal quantity determined by EOQ model, what is the annual inventory holding cost and ordering cost, respectively? Show your workings. (4 marks)

2 d) Suppose Brain has calculated the optimal order quantity as 280 bottles. But finally he decided to order 300 bottles, which increases about 7% than the optimal quantity. (4 mark)

1. Will the total inventory cost (including ordering cost and holding cost) increase or decrease?
2. Will the changes of the total inventory cost be more than 7% or less than 7%?

Explain your reason (calculation is not required. Hint: Robustness of EOQ model)