(EOQ, sensitivity analysis) Bill Bennett owns and operates a gift shop near Niagra Falls. His estimated annual demand for Niagra Falls coffee mugs is 12,000 units. His ordering costs are $15 per order, and his carrying costs are $.25 per mug.

a. What is the economic order quantity for mugs?

b. If the ordering cost rises by $2.50 per order, what will be the new EOQ for mugs?

c. If the carrying cost rises to $.35 per unit per year, what will be the new EOQ? (Use the original data except for carrying costs.)

d. Discuss the reasons that rising order cost and rising carrying cost cause a different reaction in the size of the economic order quantity.