Generally assume cost is proportional to number of

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

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