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Consider the basic EOQ model. We want to know the sensitivity of (1) the optimal order quantity, (2) the sum of the annual order cost and the annual holding cost (not including the annual purchase cost cD), and (3) the time between orders to various parameters of the problem.

a. How do (1), (2), and (3) change if the setup cost K decreases by 10%? b. How do (1), (2), and (3) change if the annual demand doubles? c. How do (1), (2), and (3) change if the cost of capital increases by 10%? (For this part, assume that the storage cost s is zero.) d. How do (1), (2), and (3) change if the changes in parts a, b, and c all occur simultaneously?

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Accounting Basics, Accounting

Category:- Accounting Basics
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