# Question

Reconsider Prob. 18.3-3. Because of the popularity of the Power model computer, Tim Madsen has found that customers are willing to purchase a computer even when none are currently in stock as long as they can be assured that their order will be filled in a reasonable period of time. Therefore, Tim has decided to switch from the basic EOQ model to the EOQ model with planned shortages, using a shortage cost of $200 per computer short per year.

(a) Use the Solver version of the Excel template for the EOQ model with planned shortages (with constraints added in the Solver dialog box that C10:C11 = integer) to find the new optimal inventory policy and its total variable inventory cost per year (TVC). What is the reduction in the value of TVC found for Prob. 18.3-3 (and given in the back of the book) when planned shortages were not allowed?

(b) Use this same spreadsheet to generate a table that shows how TVC and its components would change if the maximum shortage were kept the same as found in part (a) but the order quantity were changed to the following values: 15, 17, 19, . . . , 35.

(c) Use this same spreadsheet to generate a table that shows how TVC and its components would change if the order quantity were kept the same as found in part (a) but the maximum shortage were changed to the following values: 10, 12, 14, . . . , 30.

(a) Use the Solver version of the Excel template for the EOQ model with planned shortages (with constraints added in the Solver dialog box that C10:C11 = integer) to find the new optimal inventory policy and its total variable inventory cost per year (TVC). What is the reduction in the value of TVC found for Prob. 18.3-3 (and given in the back of the book) when planned shortages were not allowed?

(b) Use this same spreadsheet to generate a table that shows how TVC and its components would change if the maximum shortage were kept the same as found in part (a) but the order quantity were changed to the following values: 15, 17, 19, . . . , 35.

(c) Use this same spreadsheet to generate a table that shows how TVC and its components would change if the order quantity were kept the same as found in part (a) but the maximum shortage were changed to the following values: 10, 12, 14, . . . , 30.

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