Ann Chovies, owner of the Perfect Pasta Pizza Parlor, uses 30 pounds of pepperoni each day in preparing pizzas. Ann works 300 days per year so she needs to buy a total of 9,000 pounds of pepperoni. Order costs for pepperoni are $55 per order, and carrying costs are $.25 per pound per year. Ann has a hurdle rate of 12%, and the pepperoni that Ann buys from her supplier costs $5 per pound.

24. What is the EOQ for pepperoni?

a. 1,279 pounds.

b. 1,179 pounds.

c. 1,079 pounds.

d. 1,379 pounds.

25. What is the total relevant cost (ordering cost + carrying cost) for the year at an order size equal to 1,000 pounds?

1. $980
2. $960
3. $940
4. $920

26. If Ann Chovies, owner of the Perfect Pasta Pizza Parlor, decides to not to use the EOQ calculated in question 24. She decides to decrease the number of pounds per purchase order, total carrying cost __________, total ordering cost __________, and the total cost of having to have an inventory __________. HINT: If it is not obvious, either draw a graph or make up numbers and compare your answer to the answer you got for question 24.

A) decreases, increases, increases

B) decreases, increases, decreases

C) decreases, decreases, increases

D) increases, decreases, decreases

E) increases, decreases, increases