Question/s:

1. At present, what is the company's total annual inventory costs?

2. If the EOQ model is used, what is the economic lot size?

3. If the EOQ model is used, what is the number of production runs should be?

4. If the EOQ model is used, the total annual inventory costs, compared with that under present system, will increase or decrease by what amount?

The following information pertains to AAA Manufacturing Company's Product X: Annual Demand 33,750 units Annual cost to hold one unit of inventory P15 Setup cost (or the cost to initiate a production run P500 Beginning inventory of Product X 0 At present, the company produces 2,250 units of Product X per production run, for a total of 15 production runs per year. The Company is considering to use the EOQ model to determine the economic lot size and the number of production runs that will minimize the total inventory carrying cost and setup cost for Product X. The following information pertains to AAA Manufacturing Company's Product X: Annual Demand 33,750 units Annual cost to hold one unit of inventory P15 Setup cost (or the cost to initiate a production run P500 Beginning inventory of Product X 0 At present, the company produces 2,250 units of Product X per production run, for a total of 15 production runs per year. The Company is considering to use the EOQ model to determine the economic lot size and the number of production runs that will minimize the total inventory carrying cost and setup cost for Product X