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
How are financial trades made on an organized exchange? Ans: Each exchange-listed security is traded at a fixed location on the trading floor known as the post. The trading is

Accounting Exercise AVM 386 Fall 2014 Misty Mark, an infamous archer, decided to open an archery business called Bows and Biceps. The following is a list of transactions for Bows

Profitability Index or P.I. P.I. (benefit-cost ratio) = Present value of inflows / Present value of cash outlay Whether P.I. is greater than 1.0, invest and whereas less th

Stock Exchange Market The Idea and improvement of a Stock Exchange Stock exchange also identified as stock markets are special "market places" whereas already held bond

how to make a perdiem claim format to maintain the records of staff

Investment Opportunity and Capital Structure Investment Opportunity Lack of suitable investment opportunities, that is so, by positive returns or N.P.V., may encourage a

Briefly define the terms proprietorship, partnership, and corporation. Ans: The term proprietorship is used as a business owned by one person. Two or more than two people wh

Supersoftware, Inc. earns a total of $200 million each year to pay out to their 20 million shareholders. They are in a very competitive business and have found it a struggle to com


Accounting Rate of Return Method or ARR This method utilizes accounting profits from financial status to assess the viability of investment proposal via diving the average inc