For the single-period inventory model, solving for the optimal order quantity involves using
A)marginal economic analysis
B)total cost analysis
C)ABC analysis
D)reorder point analysis

Question

Quizplus · Accepted Answer

The single-period inventory model aims to determine the optimal quantity to order for a single ordering period, given uncertain demand and a fixed order cost. To do so, one needs to perform a marginal economic analysis, which balances the marginal cost (i.e., the inventory carrying cost) and the marginal revenue (i.e., the profit per unit) of ordering one additional unit. The order quantity that maximizes the difference between marginal revenue and marginal cost is the optimal order quantity. Therefore, option A, marginal economic analysis, is the best choice for solving the single-period inventory model.

For the Single-Period Inventory Model, Solving for the Optimal Order