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Mufasa Company's annual demand for its only product, MF - 690, is 30 000 units. Mufasa is currently analysing possible combinations of relevant carrying cost

Mufasa Company's annual demand for its only product, MF - 690, is 30 000 units. Mufasa is currently analysing possible combinations of relevant carrying cost per unit per year and relevant ordering cost per purchase order, depending on the company's choice of supplier and average levels of inventory. This table presents three possible combinations of carrying and ordering costs.

Relevant carrying cost per unit per year

Relevant ordering cost per purchase order

$20

$800

$40

$400

$80

$200

  1. For each of the relevant ordering and carrying-cost options, determine:

  1. EOQ; and
  2. Annual relevant total costs
  3. How does your answer to requirement (a) give insight into the impact of changes in relevant ordering and carrying costs on EOQ and annual relevant total costs?

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