Simplify the increase of variable cost

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Reference no: EM133656419

Question: For the basic EOQ model, we assumed that all costs are known. However, we may make errors in forecast. Suppose that we approximate an actual cost of RC by RC x (1 + E1) and a holding cost of HC by HC x (1 + E2) then we can simplify the increase of variable cost as following:

VC/VC₀ = 1/2 x [√1+E2/√1+E1 + √1+E1/√1+E2].

Reference no: EM133656419

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