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Suppose that we extend POQ model to the back order case.

Suppose that we extend POQ model to the back order case.

 Suppose that we extend POQ model to the back order case. That is, the unfulfilled demand (the on-hand inventory is lower than the demand) is backlogged, and can be satisfied in future with a backlogging cost. The notations are defined as follows:

a)      Please draw a figure to describe the inventory levels at different time

b)      Please show the formula of the average total cost over a year

c)      To minimize the average total cost over a year, please determine the optimal Q and B

 

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