EOQ

with Inflation

EXAmple $9.$ Company A does not incorporate the effects of inflation into its calculation of EOQ. The company is interested in finding out if inflation will impact its choice of replenishment sizes. Characteristics of the product were found to be $D=3000$ units per year, $A=$$$5\mathrm{.}45,v=$$$0\mathrm{.}60$ per unit and $r=20\%.$ Calculate the EOQ without inflation. Calculate the optimum replenishment quantities when the inflation rate is $i=2\%,9\%,15\%.$ Calculate the percentage cost penalty associated with using the EOO $($ienorine inflation$)$ for all values of $i.$