A computational model for inventory management and planning

The objective of the study is to determine the factors of the optimal level of merchandizing inventory. The study is based on a mathematical model. The results revealed some interesting findings. The most important conclusion is that the 'Usage of Material' or the Sales Volume is not the real determinate of the inventory volume. It is concluded in the model that the volume of inventories depends on the difference between the return on investment in the inventories and the rate of interest on short-term deposits. The traditional methods in cost accounting - Buffer Stock and Economic Order Quantity - have been reconciled with the profit maximization hypothesis.