Optimal order size, Macroeconomics

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 C0 then the cost of placing all N  orders is: 

OC =  C0N

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 Cn of this value:

27_optimal order.png

The third component of total costs is simply the purchase cost of all the items, or . PC = pD =  Assuming that C0, D, Cn and p are constant, what is the optimal order size q?

Posted Date: 3/9/2013 3:16:11 AM | Location : United States







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

Write discussion on Optimal order size
Your posts are moderated
Related Questions
The cash flows (CF t ) associated with an investment are listed below (assume that each cash flow occurs at the beginning of each year):                         CF 0   = -200

Suppose that the economy is characterized by the following behavioral equations: C= 170 + 0.7YD I= 170 G= 150 T= 100 a. What does equilibrium output equal? Y=? b. What d

Currently you purchase 6 packages of hot dogs a month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase hot dogs i

effects of a real wage existing in the market that is lower than the equillibrium real wage. what will eventually happen in this labour market if it is perfectly competitive

What is the use of long-run average total cost curve in the producing output? The long-run average total cost curve demonstrates the relationship in between output and average t

A, Explain how a person can be free to choose but his or her choices are casually determined by past event 2 B , Draw the casual tree for newcomb''s problem when Eve can''t perfe

What are the key components in the costs of health care services?

In a group environment, should leaders be assigned at the beginning of a project or should leaders emerge as the group is working on the project? Outline the positives and negative

Cd players are produced on an automated assembly line process. The standard cost of CD players is 150.00 per unit. The sales price is $300.00 per unit. To achieve a 10 percent mult

why lm curve upward sloping and is curve downward sloping?