Tiger Corporation purchases 1,180,000 units per year of one component. The fixed cost per order is $25. The annual carrying cost of the item is 26.2% of its $1.55 cost.

a. Determine the EOQ if (1) the conditions stated above hold, (2) the order cost is zero rather than $25, and (3) the order cost is $25 but the carrying cost is $0.01.

b.What do your answers illustrate about the EOQ model? Explain.