Kingston Distributors Inc. has Total sales of 80,000 units and an economic ordering quantity (EOQ) of 4,000 units. The firms ordering cost is $400 per order. Other costs associated with inventory are as follows:

Storage $0.50 per unit

Handling 1.60 per unit

Insurance 1.90 per unit

Required:

a) If Kingston Distributors increases their annual sales to 100,000 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 6,000 units (1 marks)