Mathematical Derivation of EOQ

Let cost per order is represented via Co. it is the cost incurred every instance one order is placed.

Let the economic quantity purchase every instance be represented via Q

Let holding cost per unit be represented via Ch

Let total demand be represented via D

The net holding cost = ½ QCh

The net Ordering cost =    C/O:  Note that C/O provides you the number of order in the period

Then net cost = ½ Qch + D/Q CO or simply the net holding up cost plus the net ordering costs

EOQ is at the point where holding cost is equal to ordering costs

That is ½ Ch = D/Q CO

½ Q²Ch = D CO                     

∴  Q²= √(2DO/h)  

   Q²Ch = 2D CO            

   Q² = 2DCo/Ch 

Here Q = √(2DCo/Ch)

Here EOQ= √(2DCo/Ch)

Posted Date: 2/5/2013 5:17:21 AM | Location : United States

Ask an Expert

Related Discussions:- Mathematical derivation of eoq, Assignment Help, Ask Question on Mathematical derivation of eoq, Get Answer, Expert's Help, Mathematical derivation of eoq Discussions

Write discussion on Mathematical derivation of eoq
Your posts are moderated

Write your message here..

Related Questions

What profit is earned by each firm, Three oligopolists, A, B and C, produce... Three oligopolists, A, B and C, produce an identical product, Q. Q is produced under conditions of constant costs, that is, AC = MC = $100. The market demand schedule for Q is:

Flexible budget, Flexible Budget Flexible budget is a budget that is d... Flexible Budget Flexible budget is a budget that is designed to change in accordance along with the level of activity attained. It includes budgeting at various levels in anti

Calculate the fixed costs to the two products, Herrestad Company does produ... Herrestad Company does produce and sell two products and the details below will be used to prepare a segmented income statement (showing the income for each product and the total)

Fixed costs, Fixed Costs Are costs such do not change along with of th... Fixed Costs Are costs such do not change along with of the level of output? It is also named as autonomous cost, as it stays the similar irrespective of the activity level as

cost classification, Explain the value attached to this common exercise un... Explain the value attached to this common exercise undertaken by Accountants.

What would be the cost transferred to the blending dept., Walter manufactur... Walter manufactures a silicone paste wax that goes through three processing departments: cracking, blending, and packing. All raw materials are introduced at the start of work in t

Storage and issue of material, Storage and Issue of Material A number ... Storage and Issue of Material A number of questions are relevant in this control of materials throughout storage and question of materials. These are as: a) Stock control r

Engineering method of cost estimation, Engineering Method of Cost Estimatio... Engineering Method of Cost Estimation This method is based on a detailed study of each operation whereas careful requirement is made for materials, labour and equipment essent

Evaluate the discounted mean term, Evaluate the discounted mean term (DMT) ... Evaluate the discounted mean term (DMT) of a bond redeemable at $120 nominal in 15 years time with annual coupons of 7% (based on a nominal bond of $100) at interest rates of 6% ,

Prepare the relevant journal entry to account, The following information is... The following information is provided to you concerning Lydia Ltd as at 30 June 2012.  Assume a company tax rate of 30%. (i) The balance of rent received in advance in the balan