The purchasing agent for a company that assembles and sells air-conditioning equipment in a Latin American country noted that the cost of compressors has increased significantly each time they have been reordered. The company uses an EOQ model to determine order size. What are the implications of this price escalation with respect to order size? What factors other than price must be taken into consideration?
Discuss the assumptions of the basic EOQ model. Why are these assumptions important?
Explain the differences between the basic EOQ model and the EPQ model? When should be EPQ model be used instead of the EOQ model?