1. Under the assumptions on which EOQs are based, what are the formulas for average lot size
and the number of orders per year?
2. What are the relevant costs associated with the two formulas? As the order quantities increase,
what happens to each cost? What is the objective in establishing a fixed order quantity?
3. Define each of the following in your own words and as a formula:
a. Annual ordering cost.
b. Annual carrying cost.
c. Total annual cost.
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