In the first (R,Q) model in Example 12.6, the one with a shortage cost, we let both
Question:
In the first (R,Q) model in Example 12.6, the one with a shortage cost, we let both Q and the multiple k be changing cells. However, we stated that the optimal Q depends mainly on the fixed ordering cost, the holding cost, and the expected annual demand. This implies that a good approximation to the optimal Q is the EOQ from Equation (12.4), replacing D with the expected annual demand and s 1 ic with the given unit holding cost. Check how good this approximation is by using this EOQ formula to obtain Q and then using Solver with a single changing cell—the multiple k—to optimize the expected total annual cost. How close are the results to those in Example 12.6?
Step by Step Answer:
Practical Management Science
ISBN: 978-1305250901
5th edition
Authors: Wayne L. Winston, Christian Albright