Reference no: EM131766987

AV City assumed with certainty that the ordering cost is $625/order and the inventory carrying cost is $130/unit/year. However, the inventory model parameters 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 costs and carrying cost are 10% less than originally estimated; (B) both ordering cost and carrying cost are 10% higher than originally estimated; (C) ordering cost is 10% higher and carrying cost is 10% lower than originally estimated; and (D) ordering cost is 10% lower and carrying cost is 10% higher than originally estimated. Determine the optimal order quantity and total inventory cost for each of the four cases. Prepare a table with values from all four cases and compare the sensitivity of the model solution to chances in parameter values.