Asked by Isaac Matsie on May 04, 2024
Verified
In some inventory models, the optimal behaviour occurs where ordering costs and carrying costs are equal to one another. Provide an example of a model where this "rule" does not hold; explain how the model's results are optimal anyway.
Ordering Costs
Expenses incurred in placing and receiving orders from suppliers, including costs related to ordering processing, transport, and receiving.
Carrying Costs
Expenses associated with holding or storing inventory over a certain period, including warehousing, insurance, and spoilage costs.
- Employ math-based models to tackle problems in inventory management, including those involving Economic Order Quantity and discounts based on quantity.
- Pinpoint the components and determine the financial aspects of inventory, covering storage, setup, and ordering expenditures.
Verified Answer
SS
Simran SainiMay 11, 2024
Final Answer :
This rule will not hold in all instances of quantity discount models. In order to take advantage of a discount, it may be cheaper to order a quantity that is not an EOQ. The goal in quantity discount models is to minimize the sum of ordering, carrying, and product costs.
Learning Objectives
- Employ math-based models to tackle problems in inventory management, including those involving Economic Order Quantity and discounts based on quantity.
- Pinpoint the components and determine the financial aspects of inventory, covering storage, setup, and ordering expenditures.
Related questions
List the Typical Cost Components That Constitute Ordering Costs in ...
In a Quantity Discount Problem, If the Savings in Product ...
In the Basic Economic Order Quantity Model and in the ...
What Are the Assumptions of the EOQ Model
Incidental Costs for Acquiring Merchandise Inventory,such as Import Duties,freight,storage,and Insurance,should ...