Economic Order Quantity (EOQ) Model
Assumptions in EOQ Model: The formula is based on the following assumptions. Without these assumptions, the EOQ model cannot work to its optimal potential. 1. The demand rate for the year is known and evenly spread throughout the year. 2.
Economic, Order, Formula, Quantity, The eoq, Economic order quantity
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www.swlearning.comJan 03, 2002 · Using the EOQ formula: EOQ = 2 × cost of order × number of units required annually carrying cost per unit = $0.80 = $200,000 $0.80 = 250,000 = 500 gals. The EOQ can also be determined by constructing a table using a range of order sizes. A tabular presentation of the data from the previous example, assuming no safety stock, follows:
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icmai.in(i) Compute the EOQ (ii) Advise whether the quantity discount offer can be accepted (Assume that the inventory carrying cost does not vary according to the discount policy) (iii) Would your advice differ if the company is offered 5% discount on -a single order? [4+3+3] Answer: (i) Formula for EOQ = Cost per unit x Storage and carrying cost rate
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