1 / 7

Economic Order quantity

Economic Order quantity. opgave 21-15 Tijn van der Zant. How to calculate EOQ. EOQ = √(2DP/C) Where: D = Demand in units for a period P = Relevant ordering costs per purchase order C = Relevant carrying costs of 1 unit in stock for the same period used in D. Problem: Keep-Kool company.

blake
Download Presentation

Economic Order quantity

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Economic Order quantity opgave 21-15 Tijn van der Zant

  2. How to calculate EOQ • EOQ = √(2DP/C) • Where: • D = Demand in units for a period • P = Relevant ordering costs per purchase order • C = Relevant carrying costs of 1 unit in stock for the same period used in D

  3. Problem: Keep-Kool company • It buys 12000 units CU29 a ₤50 per unit • 12% annual ROI (return on investment) • Carrying cost per unit per year: ₤2 • Relevant costs per purchase order: ₤120

  4. Calculate EOQ for CU29 • D = 12000 • P = 120 • C = 2 • EOQ = √(2*12000*120/2) = 1200

  5. Total annual relenant costs (TRC) • Total annual relevant cost (TRC) = DP/Q+QC/2 • Where Q = quantity and in this example I assume it’s the same as EOQ (though that’s not necessary

  6. Calculate total ordering and carrying costs using EOQ • DP/Q+QC/2 = 12000*120/1200+1200*2/2 • = 12000 * 1/10 + 1200 • = 1200 + 1200 • = ₤ 2400

  7. Reorder Point for CU29 • Reorder point = (number of units sold per unit of time) * (purchase-order lead time) • 12000 units per year = 300 units a week • Lead time = 2 weeks • Reorder point = 300 * 2 = 600 units

More Related