As the next step model to solve issues associated with inventories, in this case, it is assumed that demand is known previously, along with other details as purchasing of goods at correct intervals, instant replenishment done with no chance of shortage as well as nil lead time is taken.

Sum 1: 

If the demand is to be taken as 50 units for a product at an annual basis, then an unsatisfied amount arises that amounts to $0.45 in case of per unit per short period. If it is taken that holding cost for that inventory is 15% of average inventory valuation and ordering cost amounts up to $20, what are the shortage inventory, EOQ amount and minimum cost associated?

As per the formula, it is given that Total cost is a summation of Shortage, Ordering and Holding costs.

 

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