Inventory control models. EPL Model. Learning objective. After this class the students should be able to: calculate the order quantity that minimize the total cost inventory, based on the EPL model and analyze the implication of this model using what-if through the Excel software.
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4,000 microphones were made in January, and in February, March, and April, no microphones were produced. 1,000 microphones were sold in January, resulting in an inventory of 3,000 microphones on February 1. The inventory is used up in February, March, and April, so that on April 30 there is no inventory. Then the whole cycle repeats.
The maximum inventory is 3,000 microphones, and the average inventory is 3,000/2 = 1,500 microphones. Note the similarity between this problem and the EOQ problem we have already shown
Where C=cost of each microphone and i =interest rate
Appling the conditions for optimization, we find the optimal value for order quantity and Cost