Derive the economic order quantity model, beginning with a definition of terms and graph of cost curves
What will be an ideal response?
Answer: S is the cost to place a single order from a supplier.
H is the cost to hold one unit in inventory for a year.
D is the demand for the item for one year.
Q is the quantity ordered from the supplier.
The total cost is defined as:
TC = ordering cost + carrying cost
TC = cost to place 1 order × # orders per year + average inventory × cost to hold 1 item
TC = S + H
To find the minimum point on the total cost line, take the first derivative of the total cost equation with respect to Q and set the result equal to zero as follows:
TC = +
= + = 0
=
Q2 =
Q =
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Industry observers expect the popularity of home shopping to decrease during the next few years as interactive television technology is introduced into more households
Indicate whether the statement is true or false
Describe the perceived-value and going-rate pricing approaches
What will be an ideal response?