Tom’s Gift Shop is experiencing some inventory control problems. Tom currently orders 5,000 units 5 times each year to handle annual demand of 25,000 units. Each order costs $15 and each unit costs $1.00 to carry. Tom maintains a safety stock of 200 units.

(a) What is Tom’s Gifts' current total annual inventory cost?

(b) Calculate the economic ordering quantity (EOQ).

(c) What is average inventory under EOQ if Tom maintains a safety stock of 200 units.

(d) Calculate total annual inventory cost under EOQ.