This is the final model that is associated with inventory calculation. In this case, certain previous assumptions are taken as consistency of demand.

Here a sum is given, solving which will get you a better idea of this whole process.

Sum 1: 

It is taken that 10000 units of a particular product are demanded in a particular case. It is taken that setting up cost for that particular industry was $800 while holding cost was taken at $20 for a per unit case.

If it is taken that a shortage cost is $1000 on a per unit basis, what is the total minimum cost in regards to production, maximum shortage amount that is present and the EOQ amount?

 

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