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Question 3 (20 Marks, 200 words) A workshop purchases a component used in the production of its products directly from the supplier. The production operation requires 40,000 components annually. Assume that the ordering cost is 20 per order, the unit cost is 4 per component and the annual holding cost is 40% of the value of the inventory. The company has 250 working days per year and a lead time of five days. Answer and explain the following inventory policy questions: a. Calculate the Economic Order Quantity (E00) and explain your answer. (6 marks) b. Calculate the Re-Order Point (ROP). (3 marks) c. Determine the total annual costs associated with your recommended E00. (3 marks) d. If holding costs were to increase to 40%, what would be the effect on E00, ROP and total annual costs? Explain your answer in detail. (8 marks)