Q$3$ EOQ Robustness $-$ Adapted from Factory Physics

Consider the setting in the previous problem. Suppose that although we have estimated demand

to be $60$ per week, it turns out that it is actually $120$ per week $($i$.$e$.$ we have a $100\%$ forecasting

error$).$

a$)$ If we use the lot size calculated in the previous problem $($i$.$e$.$ using the erroneous demand

estimate$),$ what will the setup plus holding cost be under the true demand rate?

b$)$ What would the cost be if we had used the optimum lot size?

c$)$ What percentage increase in cost was caused by the $100$ percent demand forecasting

error? What does this tell you about the sensitivity of the EOQ model to errors in the

data?