What does EOQ mean? What influences it?
EOQ is Economic Order Quantity. Purchase depts. in manufacturing concerns usually face the problem of deciding the order quantity of materials. If the order size is big then the storage cost aka carrying cost is higher. On the other hand, if order size is small then the ordering cost will be high. Hence to minimize the order and carrying cost, it is necessary to determine an optimal qty level. This quantity is the EOQ.
FACTORS INFLUENCING EOQ:
1) Ordering Costs Cost of transportation, cost of receiving goods, freight, taxes, import duties, customs, etc
2) Carrying Costs Storage costs, insurance, cost of handling, warehouse expenses, etc
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What does an economic order quantity, or EOQ and the total cost formula tell management? What is the reorder point?
a.) What is the EOQ?
EOQ = __ units (round to the nearest whole number).
b.) Should the discount be taken?
Since the total cost with discounted volume is __ the total cost
at the EOQ volume, Cesar Rego should __ the discount, provided
other factors such as storage space, etc. permits
Problem 12.21 Question Help o Cesar Rego Computers, a Mississippi chain of computer hardware and software retail outlets, supplies both educational and commercial customers with memory and storage...
Question 5: what is the new EOQ if a product whose EOQ is 500 experiences a 30% increase in demand
Extra Credit - EOQ Problem A. What is the EOQ for a business that sells 5,000 units each year when the cost of placing an order is $5.00 and the cost of carrying costs are $3.50 per order? B. How long will EOQ last and how many orders are placed annually (two calculations)? C. As a result of lower interest rates, management determines that the carrying cost fell from $3.50 to $1.80/unit. What is the new EOQ and annual number...
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Calculate the EOQ size for the following case. What is the EOQ size and the number of orders placed per quarter? For your answer, round up the figures up to 0 decimal points. (size/number) The average demand for the item is 540 units per quarter. It costs $150 to place an order. The item's price is $250 per unit and carrying cost ratio for the year is 20%. 147 units/4 times per quarter 147 units/15 times per quarter 74 units/15...
1. What are the six assumptions of the EOQ model? 2. Average daily demand for a product is normally distributed with a mean of 25 units and a standard deviation of 4 units. Lead time is fixed at 20 days. What reorder point provides for a service level of 95 percent (z=1.65)?
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