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The condition that needs to be satisfied is C = =1 Substituting the value of Q, in Eq. 7.7 in the above equation, we get MEOQ,C; = B or h48 B Q,C, (7.9) It is noticed that the term m is independent of e. It is easy to compute m since we need only the EOQ and the budget. This method can be only used if the propor- tionality assumption is met. We will now illustrate the application of the budget constraint model with a numerical example. Solved Problem 7.1 Inventory parameters for three products - A, B, and C-sold by a retailer are shown in Table 7.3. The retailer uses an inventory carrying rate of 25% per annum. What would be the economic lot size if the retailer does not want to invest more than $10,000 in the average inventory of these three products