A company imports kids toys and keep them in a central warehouse, from there they distribute them to retailers all around Norway. Last year the annual demand for the Monopoly game was 25000 pieces. The company purchases each game set for NOK 100. It costs NOK 2500 for order processing and transport, no matter how many games they order. The annual interest rate is 15%. Answer the following (you can use Excel worksheet that should be attached to your answer):

a) Calculate EOQ and the total logistics costs

b) What is the average capital tied up in inventory and the annual inventory turn-over rate if they order EOQ?

c) The CFO of the company wants to reduce the tied-up capital by 25%, what will be the order size then? d) You are offered a discount of 2% by ordering 5000 items. Will you accept the offer?