Determine the optimal order size, Microeconomics

A major component of the costs of many large firms is the cost associated with ordering and holding inventory. If the yearly demand for the good is D and the size of each order placed is  q  then the number of orders  N  in each year is:

N=D/Q

If the cost of placing each order is Co then the cost of placing all N orders is:

OC = CoN

The second component is the carrying or handling cost of an inventory. Under the assumption that the average number of items in stock is q / 2  and with cost of each item set at  p , the value of this average number of items is p (q / 2) . The carrying in this situation is the proportion C of this value:

CC = Cnp (q/2)

The third component of total costs is simply the purchase cost of all the items, or PC = pD.  Assuming that Co, D, Cn and p are constant, what is the optimal order size q?

Posted Date: 3/9/2013 4:46:43 AM | Location : United States







Related Discussions:- Determine the optimal order size, Assignment Help, Ask Question on Determine the optimal order size, Get Answer, Expert's Help, Determine the optimal order size Discussions

Write discussion on Determine the optimal order size
Your posts are moderated
Related Questions
Analysis of business portfolio by using Boston Consultant Group (BCG) Matrix.

What are the costs and difficulties of such an operation? The direct costs are administrative, cooperative and storage costs, whereas the societal costs include misallocation,

(a) Give an overview of the Concept of Land Economic (b) Provide a definition of Land/Economics (c) Discuss the origin of Land Economics (d) Modern and Traditional Land Ec

The price of milk is usually much less expensive in a grocery store versus a convenience store. Using economic terminology, explain why people purchase milk at convenience stores.

how to find pareto efficient output using algebra

Consider a hypothetical ABC economy in which the narrowly-defined measure of the  money supply (M1), as defined in the Canadian sense, in existence is 1250$ million. Assuming the e

diagrammatically condition of consumer equilibirium

Pollutant Any substance, species produced either by a natural source or by human activity, which produces very adverse effect on the environment is called pollutant. Some commo

Low standards of living: In developing nations general standards of living tend to be very low for the vast majority of the people. These low standards of living are manifest

Effect of Gasoline Tax with Rebate Assume -Income = $9,000 - Price of gasoline = $1