In some inventory models, the optimal behaviour occurs where ordering costs and carrying costs are equal to one another. Provide an example of a model where this rule does not hold; explain how the model's results are optimal anyway.

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Simran Saini · Accepted Answer

Final Answer : This rule will not hold in all instances of quantity discount models. In order to take advantage of a discount, it may be cheaper to order a quantity that is not an EOQ. The goal in quantity discount models is to minimize the sum of ordering, carrying, and product costs.

In some inventory models, the optimal behaviour occurs where ordering costs and carrying costs are equal to one another. Provide an example of a model where this "rule" does not hold; explain how the model's results are optimal anyway.

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