Warehouse Plc purchases and resells television sets. It has a monthly demand of 24,000 units. It currently orders the television sets in batches of 12,000 and each order incurs a fixed cost of 400.

The inventory manager has carried out an analysis and determined that the EOQ for the company should be 8,000 units. If Warehouse Plc implements an EOQ policy with the EOQ set at 8,000 units, what effect will this have on its annual ordering costs?

Assume steady even demand throughout the year, lead times of zero, and safety stock of zero.

		Increase of 4,800 in annual order costs
		Increase of 14,400 in annual order costs
		Increase of 400 in annual order costs
		No change in annual ordering costs as the cost per order is fixed