Case 1: Backorders too expensive:
:
In this case, a simple examination of (2) is
sufficient. All terms are nonnegative, and any
non-zero choice of S would make the TC strictly
greater than
: Reducing all the terms after
the constant to zero minimizes the total cost, i.e.,
; and TC ¼
: This
demonstrates explicitly that in this case we get the
basic EOQ without backorders. So far we have
established that the optimal is S ¼0 if
: Actually, this statement can be
generalized to an ‘‘if and only if’’ condition after
we conclude that in Case 2, the optimal value of S
is strictly positive.