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Dear John,
My question is the following.
Buffer inventory is 10 000, Order quantity 100 000.
To calculate the average inventory, the publisher has done the following100 000/2 +10 000 = 60 000.
Why not do the basic average?
(100 000 + 10 000)/2 = 55 000 (This is what I have done, when solving the problem).
Thanks in advance
Buffer inventory is when you hold more units than actually needed, throughout the year.
Therefore the maximum inventory will be 110,000 (100,000 + 10,000) and the minimum inventory will be 10,000.
The average inventory will be (110,000 + 10,000) / 2 = 60,000
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