ABC bookstore is trying to determine the optimal order quality for a popular novel just printed in paperback. The store feels that the book will sell at four times its hardback figures. It would therefore sell approximately 100,000 copies in the next year at a price of $90. The store buys the book at a wholesale figure of $50. ABC bookstore requires a 15% annual rate of return on investment. In addition, the relevant carrying cost is $2.50 a copy per year. It costs $200 to place an order for more books.

(a) Determine the economic order quality (EOQ). (b) How many orders will the company need to place this year?

(c) Calculate the average inventory level.

(d) Calculate the total annual inventory cost.

(e) Give three examples of opportunity costs typically not recorded in accounting systems, although they are relevant when using the EOQ model.