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
should be provied on a centralised or a decentralised basic?

Mr. and Mrs. smith are considering the purchase of a house. They can afford to make  a mortgage payment of $750 per month. If the current mortgage interest rate is 9% with monthly

In 1998, the Syndicated Bank Loan market (defined as loans having more than two bank lenders) was a vast and cheap source of debt financing for U.S. corporations.  This market was

What are the Advantages of placement Placement has the below benefits: (i) Timing of issue is significant for successful floatation of shares. In a depressed market cond

Volpe Corporation produces class rings to sell to college and high school students. These rings sell for $75 each, and cost $30 each to produce. Volpe Corporation has fixed costs o

Identify one each (1) benefit, (2) disbenefit, and (3) monetary cost that would impact each of the following projects: a.A new electrical distribution station in a developing pa

Yard Stick Required in Ratio Analysis 1. Past performance of the company The company's previous performance past ratio is needed to gauge or measure the company's present

Hatch System - Stock Exchange This is an automatic system based on the assumption such when investors sell at a certain percent age below the top of the market and buys at a s

Assignment Gary and Beth have accepted the asset allocation that you have given them, but are now looking to you to give them some advice on what stocks they should purchase. R

Significance of Investment Decisions a) Such type of decisions is importance since they will influence the company's size or like fixed assets, retained and sales earnings.