An economic order quantity model with demand-dependent unit cost

For the classical EOQ problem a relationship between demand and unit cost may exist under certain circumstances. This paper proposes an EOQ model with demand-dependent unit cost and formulates the optimization problem as a geometric program (GP). It solves the GP analytically to obtain a closed-form optimal solution. An illustrative example is provided to show the working procedures of applying GP to solve a given problem. The paper also touches on some aspects of sensitivity analysis based on the GP approach. It demonstrates the point that GP has potential as a viable mathematical tool for the analysis of a certain class of inventory control problems.