On the Effect of a Fixed Cost on an Inventory Model with Time – Dependent Parameters

An economic order quantity model with a time-dependent demand, a fixed cost and a time-dependent holding cost is developed. It provides quantitative insight into a serious practical problem where costs are incurred even when an order is not placed. The effect of a fixed cost on the inventory model is examined. Previous models incorporating time-dependent demand rate assume that the holding cost is constant for the entire inventory cycle. The holding cost is considered as an increasing function of time spent in storage. Differential calculus is used for finding the optimal solution. A numerical example is used to validate the proposed model. Sensitivity analysis is carried out to analyze the effect of changes in the optimal solution with respect to changes in various parameters.