Toyota company manufactures some of its product lines from raw materials and for other prod. assembles purchased parts.

For One product 10,000 sub assemble parts at $ 100 each are Purchased annually. The order and receiving cost is $ 200 and the carrying cost is 25%.

This is only one of many inventory items the firm must carry and a capital rationing decision has be made to spend only $ 10000 at a time on these subassemblies. Units must be order in multiples of 100.

Required:-

1. Computatyion of the EOQ.

2. The Opportunity loss expressed as carrying cost by changing the EOQ and Inventory level to the availability of capital.