Reconsider the bolt example in problem 4.Suppose that although we have estimated demand to be 60 per week,it turns out that it is actually 120 per week(i.e.,we have a 100 percent error).
a)If we use the lot size to calculated in the previous problem(i.e.,using the erroneous demand estimate),what will the setup plus holding cost be under the true demand rate?
b)What would the cost be if we had used the optimum lot size?
c) What percentage increase in cost was used by the 100 percent demand forcasting error? What does this tell you about the sensitivity of the EOQ model to error in the data?