Final answer:
When the order placement cost (K) increases, the EOQ increases. Annual demand does not depend on the order placement cost. The holding cost per unit per year increases when the order placement cost increases.
Step-by-step explanation:
When the order placement cost (K) increases, the Economic Order Quantity (EOQ) increases. The EOQ is the optimal order quantity that minimizes the total cost of inventory. As the order placement cost increases, it becomes more expensive to place orders, so it is more cost-effective to order larger quantities less frequently.
Annual demand does not directly depend on the order placement cost. It is determined by factors such as consumer demand and market conditions.
On the other hand, the holding cost per unit per year increases when the order placement cost increases. Holding cost refers to the cost of storing inventory, such as warehousing and carrying costs. As larger order quantities are placed, there is a greater need for storage space, which results in higher holding costs.
Therefore, the correct answer is (a) the EOQ increases.