The data in the following two questions are taken fromassignment 4 page 296 of Merdith & Shafer. The Dubai basedconstruction company Blue Ocean Towers uses a constant flow of intotal 15,000 solar panels per year, which it buys from King Kong.Blue Ocean Towers receives the ordered panels from King Kong’sregional distribution center. The ordering cost per delivered orderare 50 USD, and the holding cost for Blue Ocean Towers are 1.5 USDper panel per year.

Question 1. Calculate the EOQ for Solar Panels for BlueOcean Towers.

As a result of implementing Sun Kong’s coloring innovation, KingKong offers Blue Ocean Towers to switch to buying colored panels.The colors red, yellow, and blue are available for the same priceas the original panel for a period of 12 months. As King Kong willhave to set up the coloring machines, the ordering costs for thered and green solar panels will be four times higher than for theregular panels, at 200 USD per order.

Question 2. Calculate the EOQ for Colored Solar Panelsfor Blue Ocean Towers. Briefly interpret the change in quantitywhen compared to the answer to Question 1.

Question 3. Blue Ocean Towers experiences that demandfor the colored panels is less stable than for the original ones,causing risks for going out of stock. What inventory replenishmentdo you advise them to use in this situation.