BUS 111 Lecture 17: BUS111_0005_11-20-15
Document Summary
When you"re selling goods, you have some cost associated with maintaining an inventory: a storage cost and a reorder cost. The lot size is the size of the order, or the maximum number you have in stock at any time. If we say that x is the lot size, then the average size is x/2 . Def: the economic lot size is the lot size that minimizes the total cost of storage and reordering. It makes sense to look for this using our minimization with derivatives. Example: suppose a retail store sells 2500 laptops per year. Solution: let x= lot size , then c(x)= storage costs + ordering costs. Domain: [7,2500] 7= every day, 2500= once a year. The minimum cost is ,500 obtained when ordering 100 laptops at a time. Example: suppose a publisher is trying to determine how many times it should print a particular title.
