Dunlop Distributors Inc. has Total sales of 50,000 units and an economic ordering quantity (EOQ) of 2,450 units. The firms ordering cost is $300 per order. Other costs associated with inventory are as follows:

Storage $1.00 per unit

Handling 1.50 per unit

Insurance 2.50 per unit

Required:

a) If Dunlop Distributors increases their annual sales to 80,000 units, what will its new Economic Ordering Quantity be? (3 marks)

b) How much is the firms total inventory cost increase when its EOQ changes? (6 marks)

c) By how much would the firms total inventory cost increase if they have safety stock of 8,000 units (1 marks)