1. Special Inventory Models
Supplement E
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2. Special Inventory Models
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3. Special Inventory Models
On-hand inventory
Time
Figure E.1
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4. Special Inventory Models
Production quantity Q
On-hand inventory
Time
Figure E.1
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5. Special Inventory Models
Production quantity Q
Demand during production interval
On-hand inventory
p – d
Time
Figure E.1
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6. Special Inventory Models
Production quantity
Demand during production interval
On-hand inventory Q
Time
p – d
Figure E.1
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7. Special Inventory Models
Production quantity
Demand during production interval
On-hand inventory Q
Time
p – d
Figure E.1
Production and demand
Demand only
TBO
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8. Special Inventory Models
Production quantity
Demand during production interval
Production and demand
Demand only
TBO
On-hand inventory Q
Time
p – d
Figure E.1
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9. Special Inventory Models
Production quantity
Demand during production interval
Maximum inventory
Production and demand
Demand only
TBO
On-hand inventory Q
Time
Imax
p – d
Figure E.1
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10. Special Inventory Models
Production and demand
Demand only
TBO
Production quantity
Demand during production interval
Maximum inventory
On-hand inventory Q
Time
Imax
p – d
Figure E.1
Imax = (p – d) = Q( ) p
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11. Special Inventory Models
Production and demand
Demand only
TBO
Production quantity
Demand during production interval
Maximum inventory
On-hand inventory Q
Time
Imax
p – d
Figure E.1
C = (H) (S) 2 D
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12. Special Inventory Models
Production and demand
Demand only
TBO
Production quantity
Demand during production interval
Maximum inventory
On-hand inventory Q
Time
Imax
p – d
Figure E.1
C = ( ) (S) D
Q p – d p
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13. Special Inventory Models
Production and demand
Demand only
TBO
Production quantity
Demand during production interval
Maximum inventory
On-hand inventory Q
Time
Imax
p – d
Figure E.1
ELS = p
2DS H
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14. Special Inventory Models
Economic Production Lot Size
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15. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
Example E.1
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16. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = p
p – d
2DS H
Example E.1
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17. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
2(10,500)($200)
$0.21
190
190 – 30
ELS =
Example E.1
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18. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
2(10,500)($200)
$0.21
190
190 – 30
ELS =
Example E.1
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19. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
2(10,500)($200)
$0.21
190
190 – 30
ELS =
Example E.1
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20. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = barrels
Example E.1
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21. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = barrels
C = ( )(H) (S)
Q p – d p D Q
Example E.1
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22. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = barrels
C = ( ) ($0.21) ($200)
– 30
10,500
4873.4
Example E.1
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23. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = barrels
C = $ $430.91
Example E.1
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24. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = barrels
C = $861.82
Example E.1
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25. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = barrels
C = $861.82
ELS D
TBOELS = (350 days/year)
Example E.1
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26. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = barrels
C = $861.82
4873.4
10,500
TBOELS = (350 days/year)
Example E.1
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27. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = barrels
C = $861.82
TBOELS = , or 162 days
Example E.1
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28. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = barrels
ELS p
C = $861.82
Production time =
TBOELS = , or 162 days
Example E.1
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29. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = barrels
4873.4
190
C = $861.82
Production time =
TBOELS = , or 162 days
Example E.1
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30. Special Inventory Models
Economic Production Lot Size
Demand = 30 barrels/day Setup cost = $200
Production rate = 190 barrels/day Annual holding cost = $0.21/barrel
Annual demand = 10,500 barrels Plant operates 350 days/year
ELS = barrels
C = $861.82
Production time = 25.6, or 26 days
TBOELS = , or 162 days
Example E.1
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31. Special Inventory Models
Economic Production Lot Size
Figure E.2
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32. Special Inventory Models
Quantity Discounts
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33. Special Inventory Models
Quantity Discounts
Figure E.3
Total cost (dollars)
Purchase quantity (Q)
(a) Total cost curves with purchased materials added
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34. Special Inventory Models
Quantity Discounts
Figure E.3
C for P = $4.00
C for P = $3.50
C for P = $3.00
Total cost (dollars)
Purchase quantity (Q)
(a) Total cost curves with purchased materials added
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35. Special Inventory Models
Quantity Discounts
Figure E.3
C for P = $4.00
C for P = $3.50
C for P = $3.00
Total cost (dollars)
First price break
Second price break
Purchase quantity (Q)
(a) Total cost curves with purchased materials added
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36. Special Inventory Models
Quantity Discounts
Figure E.3
C for P = $4.00
C for P = $3.50
C for P = $3.00
Total cost (dollars)
First price break
Second price break
Purchase quantity (Q)
(a) Total cost curves with purchased materials added
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37. Special Inventory Models
Quantity Discounts
Figure E.3
C for P = $4.00
C for P = $3.50
C for P = $3.00
Total cost (dollars)
PD for
P = $4.00
PD for
P = $3.50
PD for
P = $3.00
First price break
Second price break
Purchase quantity (Q)
(a) Total cost curves with purchased materials added
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38. Special Inventory Models
Quantity Discounts
Figure E.3
C for P = $4.00
C for P = $3.50
C for P = $3.00
Total cost (dollars)
PD for
P = $4.00
Total cost (dollars)
PD for
P = $3.50
PD for
P = $3.00
First price break
Second price break
Purchase quantity (Q)
Purchase quantity (Q)
(a) Total cost curves with purchased materials added
(b) EOQs and price break quantities
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39. Special Inventory Models
Quantity Discounts
Figure E.3
C for P = $4.00
C for P = $3.50
C for P = $3.00
Total cost (dollars)
PD for
P = $4.00
Total cost (dollars)
PD for
P = $3.50
PD for
P = $3.00
First price break
Second price break
Purchase quantity (Q)
Purchase quantity (Q)
(a) Total cost curves with purchased materials added
(b) EOQs and price break quantities
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40. Special Inventory Models
Quantity Discounts
Figure E.3
C for P = $4.00
C for P = $3.50
C for P = $3.00
Total cost (dollars)
PD for
P = $4.00
Total cost (dollars)
PD for
P = $3.50
PD for
P = $3.00
First price break
Second price break
First price break
Second price break
Purchase quantity (Q)
Purchase quantity (Q)
(a) Total cost curves with purchased materials added
(b) EOQs and price break quantities
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41. Special Inventory Models
Quantity Discounts
Figure E.3
C for P = $4.00
C for P = $3.50
C for P = $3.00
EOQ 4.00
EOQ 3.50
EOQ 3.00
Total cost (dollars)
PD for
P = $4.00
Total cost (dollars)
PD for
P = $3.50
PD for
P = $3.00
First price break
Second price break
First price break
Second price break
Purchase quantity (Q)
Purchase quantity (Q)
(a) Total cost curves with purchased materials added
(b) EOQs and price break quantities
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42. Special Inventory Models
Quantity Discounts
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43. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
Example E.2
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44. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
2DS H
EOQ57.00 =
Example E.2
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45. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
2(936)(45)
0.25(57.00)
EOQ57.00 =
Example E.2
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46. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
2(936)(45)
0.25(57.00)
EOQ57.00 =
Example E.2
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47. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
Example E.2
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48. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
Example E.2
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49. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
Example E.2
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50. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
Example E.2
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51. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
Example E.2
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52. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
Example E.2
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53. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
EOQ60.00 = 75 units
Example E.2
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54. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
EOQ60.00 = 75 units
Example E.2
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55. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
EOQ60.00 = 75 units
Example E.2
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56. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
EOQ60.00 = 75 units
C = (H) (S) + PD Q 2 D
Example E.2
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57. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
EOQ60.00 = 75 units 75 2
936 75
C75 = [(0.25)($60.00)] ($45) + $60.00(936)
Example E.2
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58. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
EOQ60.00 = 75 units
C75 = $57,284
Example E.2
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59. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
EOQ60.00 = 75 units
C75 = $57,284
300 2
936
300
C300 = [(0.25)($58.80)] ($45) + $58.80(936)
Example E.2
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60. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
EOQ60.00 = 75 units
C75 = $57,284
C300 = $57,382
Example E.2
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61. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
EOQ60.00 = 75 units
C75 = $57,284
C300 = $57,382
500 2
936
500
C500 = [(0.25)($57.00)] ($45) + $57.00(936)
Example E.2
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62. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
EOQ60.00 = 75 units
C75 = $57,284
C300 = $57,382
C300 = $56,999
Example E.2
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63. Special Inventory Models
Quantity Discounts
Order Quantity Price per Unit
0 – 299 $60.00
300 – 499 $58.80
500 or more $57.00
Annual demand = 936 units
Ordering cost = $45
Holding cost = 25% of unit price
EOQ57.00 = 77 units
EOQ58.80 = 76 units
EOQ60.00 = 75 units
C75 = $57,284
C300 = $57,382
C300 = $56,999
Example E.2
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64. Special Inventory Models
Figure E.4
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65. Special Inventory Models
One-Period Decisions
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66. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
Example E.3
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67. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5 10 20 30 40 50 D Q
For Q = D
Payoff = pQ
Example E.3
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68. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5 10 20 30 40 50 D Q
For Q = D
Payoff = ($10)(10)
Example E.3
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69. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
10 $100 20 30 40 50 D Q
For Q = D
Payoff = $100
Example E.3
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70. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
10 $100 $100 $100 $100 $100 20 30 40 50 D Q
For Q ≤ D
Payoff = pQ
Example E.3
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71. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
10 $100 $100 $100 $100 $100 D Q
For Q ≤ D
Payoff = pQ
Example E.3
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72. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
10 $100 $100 $100 $100 $100 D Q
For Q > D
Payoff = pD – I(Q – D)
Example E.3
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73. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
10 $100 $100 $100 $100 $100 D Q
For Q > D
Payoff = ($10)(30)
– ($5)(40 – 30)
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

74. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
10 $100 $100 $100 $100 $100 D Q
For Q > D
Payoff = ($10)(30)
– ($5)(40 – 30)
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

75. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
10 $100 $100 $100 $100 $100 D Q
For Q > D
Payoff = $250
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

76. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
10 $100 $100 $100 $100 $100 D Q
For Q > D
Payoff = $250
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

77. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
10 $100 $100 $100 $100 $100
40 –
50 – D Q
For Q > D
Payoff = pD – I(Q – D)
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

78. Special Inventory Models
Figure E.5
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

79. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
Expected payoff30 =
10 $100 $100 $100 $100 $100
40 –
50 – D Q
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

80. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
Expected payoff30 = 0.2($0)
10 $100 $100 $100 $100 $100
40 –
50 – D Q
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

81. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
Expected payoff30 = 0.2($0) + 0.3($150)
10 $100 $100 $100 $100 $100
40 –
50 – D Q
Example E.3
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82. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
Expected payoff30 = 0.2($0) + 0.3($150) + 0.3($300)
10 $100 $100 $100 $100 $100
40 –
50 – D Q
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

83. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
Expected payoff30 = 0.2($0) + 0.3($150) + 0.3($300) + 0.1($300)
10 $100 $100 $100 $100 $100
40 –
50 – D Q
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

84. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
Expected payoff30 = 0.2($0) + 0.3($150) + 0.3($300) + 0.1($300) + 0.1($300)
10 $100 $100 $100 $100 $100
40 –
50 – D Q
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

85. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
Expected payoff30 = $195
10 $100 $100 $100 $100 $100
40 –
50 – D Q
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

86. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5
Expected payoff30 = $195 D
Q Expected Payoff
10 $100 $100 $100 $100 $100
40 –
50 –
Example E.3
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

87. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5 D
Q Expected Payoff
10 $100 $100 $100 $100 $100 $100
40 –
50 –
Figure E.6
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.

88. Special Inventory Models
One-Period Decisions
Demand
Demand Probability
Profit per ornament during season = $10
Loss per ornament after season = $5 D
Q Expected Payoff
10 $100 $100 $100 $100 $100 $100
40 –
50 –
Figure E.6
To Accompany Krajewski & Ritzman Operations Management: Strategy and Analysis, Seventh Edition © 2004 Prentice Hall, Inc. All rights reserved.