Timber Company purchase 360,000 units of a deluxe product each year. The cost of an order is $72; the cost of carrying one unit in inventory for a year is $4 The item cost $25 each. Timber currently current order size is 10,000 deluxe units per order.

1. Compute the ordering and carrying costs using the company current policy

2. Calculate the order size using EOQ.

3. Calculate the ordering and carrying costs using EOQ.

4. If Timber is offered a discount of 20 cents per unit to order 10,000 per order should the offer be accepted or should the company place an order using EOQ?

5. Explain in your own words three traditional reasons for carrying inventory?