In the single period inventory model, when the goodwill cost increases:
A)the optimal order quantity will decrease.
B)the optimal order quantity will increase.
C)the mean demand will increase.
D)the mean demand will decrease.

Question

Quizplus · Accepted Answer

When the goodwill cost increases, it means the cost of not having enough inventory to meet demand (and thus potentially losing customers or facing other negative consequences) is higher. Therefore, to mitigate this risk, the optimal strategy is to increase the order quantity to ensure a higher probability of meeting customer demand.

In the Single Period Inventory Model, When the Goodwill Cost