Basic economic order quantity model , Finance Basics

Basic economic order quantity (EOQ) model 

This model is one of the oldest and most commonly used in inventory control. It is based on a number of assumptions: 

  • The demand for the item is known, constant and independent of the demand for other items
  • The lead time (time between ordering and receipt) is known and fixed
  • The receipt of the order occurs in a single instant and not over a period of time
  • Quantity discounts are not calculated as part of the model
  • The only costs that may vary within the model are the costs of ordering (or setting up a machine if the item is manufactured) and the storing or holding cost of the item ?
  • Stock outs or shortages do not occur.
Posted Date: 3/14/2013 5:45:59 AM | Location : United States







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