Course Solutions Uncategorized (Answered) : In some inventory models, the optimal behavior occurs where ordering costs and carrying costs are equal to one another. Provide

(Answered) : In some inventory models, the optimal behavior occurs where ordering costs and carrying costs are equal to one another. Provide

In some inventory models, the optimal behavior occurs where ordering costs and carrying costs are equal to one another. Provide an example of a model where this rule does not hold; explain how the model’s results are optimal anyway.

Expert Answer


This model cannot be applied in almost every instance of quantity discount model. In order to enjoy the benefit of discounts, we can order the quantity which is not equal to EOQ to have the cheaper order value. The main objective of quantity discount model is to reduce or minimize the sum of ordering, carrying, and purchase costs

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