Chapter 12, Problem 14DQ

Summary Introduction

To explain: The expression “robust model.” Specifically, what would you tell a manager who exclaimed, “Uh-oh, we’re in trouble! The calculated EOQ is wrong; actual demand is 10% greater than estimated.

Introduction:

Economic order quantity (EOQ):

EOQ is the quantity of units a company must add to its inventory so as to minimize the full inventory costs. It will determine the ideal order quantity which will decrease the inventory management costs.