Chapter 12, Problem 25P

(a)

Summary Introduction

Interpretation:

Thetotal annual cost of the current operating policy at GPI.

Concept Introduction:

The maximum inventory level $\left(I_{\max }\right)$ is determined by using the following formula:

  $I_{\max }=Q\left(1-\frac{d}{p}\right)$

(b)

Summary Introduction

Interpretation:

The economic production quality (EPQ).

Concept Introduction:

The maximum inventory level $\left(I_{\max }\right)$ is determined using the following formula:

  $I_{\max }=Q\left(1-\frac{d}{p}\right)$

(c)

Summary Introduction

Interpretation:

The total annual cost of using the EPQ.

Concept Introduction:

The maximum inventory level $\left(I_{\max }\right)$ is determined using the following formula:

  $I_{\max }=Q\left(1-\frac{d}{p}\right)$

(d)

Summary Introduction

Interpretation:

The penalty cost incurred with the present policy.

Concept Introduction:

The maximum inventory level $\left(I_{\max }\right)$ is determined using the following formula:

  $I_{\max }=Q\left(1-\frac{d}{p}\right)$