In the first (R,Q) model in Example 13.7, the one with a shortage cost, we let both Q and the multiple k be changing cells. However, we stated that the optimal Q depends mainly on the fixed ordering...

In the first (R,Q) model in Example 13.7, the one with a shortage cost, we let both Q and the multiple k be changing cells. However, we stated that the optimal Q depends mainly on the fixed ordering cost, the holding cost, and the expected annual demand. This implies that a good approximation to the optimal Q is the EOQ from equation (13.4), replacing D with the expected annual demand and s ic with the given unit holding cost. Check how good this approximation is by using this EOQ formula to obtain Q and then using Solver with a single changing cell—the multiple k—to optimize the expected total annual cost. How close are the results to those in Example 13.7?

Example 13.7