### Changes in parameter values

##### Reference no: EM137655

Q. The metropolitan book company assumed with certain that the ordering cost is \$1200 per order as well as the inventory carrying cost is \$0.08 per unit per year. However, the inventory model parameters are frequently only estimates that are subject to some degree of uncertainty. Calculate the optimal order quantity if
both ordering costs as well as carrying cost are 10% lower than originally estimated. (b) both ordering cost as well as carrying cost are 10% higher than originally estimated, (c) ordering cost is 10% higher as well as carrying cost is 10% lower than originally estimated, (d) ordering cost is 10% lower as well as carrying cost is 10% higher than originally estimated. Determine the optimal order quantity as well as total inventory cost for each of the four cases. Prepare a table with values from all four cases as well as compare the sensitivity of the model solution to changes in parameter values.

Using Excel, Determine the following:
Hayes Electronics assumes with certainty that the ordering cost is \$450 per order as well as the inventory carrying cost is \$170 per unit per year. However, the inventory model parameters are frequently only estimates that are subject to some degree of uncertainty. Consider four cases of variation in the model parameters as follows:

(a) both ordering cost as well as carrying cost is 10% lower than originally estimated.

(b) both ordering cost as well as carrying cost are 10% higher than originally estimated,

(c) ordering cost is 10% higher as well as carrying cost is 10% lower than originally estimated, (d) ordering cost is 10% lower as well as carrying cost is 10% higher than originally estimated. Determine the optimal order quantity as well as total inventory cost for each of the four cases. Prepare a table with values from all four cases as well as compare the sensitivity of the model solution to changes in parameter values.

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