Basic eoq model, Finance Basics

Basic EOQ Model

The basic inventory decision model is Economic Order Quantity or called EOQ model. This model is specified via the following equation as:

334_Basic EOQ Model 1.png

Whereas:Q is the economic order quantity

               Cn is the cost of holding inventories per unit per order

               Co is the cost of putting and obtains an order

               D is the annual demand in units

The net cost of operating the economic order quantity is specified via total ordering cost in additional total holding costs.

TC = ½QCn + ((D/Q) C0)

Whereas: Total holding cost = ½QCn

Total ordering cost = (D/Q) C0

The holding costs involve as:

  1. Storage costs
  2. Cost of tied up capital
  3. Obsolescence costs
  4. Insurance costs

The ordering costs involve as:

  1. Shipping and handling costs
  2. Cost of placing orders such as telephone and clerical costs
Posted Date: 2/1/2013 2:49:54 AM | Location : United States

Related Discussions:- Basic eoq model, Assignment Help, Ask Question on Basic eoq model, Get Answer, Expert's Help, Basic eoq model Discussions

Write discussion on Basic eoq model
Your posts are moderated
Related Questions
You are required to select any one company of your choice which is listed on either Dubai Financial Market (DFM) or Abu Dhabi Securities Market (ADSM). Send me an email giving at l

Investment  Attributes/  Factors  Influencing  Selection  of  Investment In  choosing specific  investments,  investors  would require definite  ideas  regarding  features

Development of Lease Finance in Middle Asia Reasons Why Lease Finance Is Not Well Developed In Middle Asia 1. Lease charges are generally prohibitive that is the cost

Explain the Operations of Indian Stock Market. Meaning of Stock Exchange: Stock exchange means an organized market where securities issued by government organizations, compan

Example of Capital Structure of a Company Example Company XYZ restricted has the given capital structure as:   10,000 Sh.10 ordinary shares 10,000

Commercial Bank for Short Term Loans Purpose Why Commercial Banks Prefer To Lend Short Term Loans a) Long-term forecasts are not only difficult although also vague as unc

Funding Venture Capital Whenever a company's directors look for support from a venture capital institution, so they must distinguish that as: a) The institution will would

effect of gdp in the domestic market