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Unformatted text preview: ally assume cost is proportional to number of
units of excess demand.
units The EOQ Model
1. Demand is fixed at λ units per unit time.
2. Shortages are not allowed.
3. Orders are received instantaneously. (this will be
4. Order quantity is fixed at Q per cycle. (can be proven
5. Cost structure:
a) Fixed and marginal order costs (K + cx)
b) Holding cost at h per unit held per unit time.
b) 5 Inventory Levels for the EOQ
Model The EOQ Model
G (Q ) = Kλ
+ λc +
2 The three terms composing G(Q) are annual setup cost,
annual purchase cost and annual holding cost
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This document was uploaded on 03/23/2014.
- Spring '14