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Calculate the economic order quantity for the scenario above, if annual demand is 3080 jobs The...

Calculate the economic order quantity for the scenario above, if annual demand is 3080 jobs The opportunity cost of money is = 15% per year. The cost physically hold an item in inventory is 8% per year. The cost to the company of ALL the material for one job is $750 Administrative Order cost of $100.

What is the EOQ?

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Answer #1

Given information :

Annual Demand (D) =3080 Jobs

Opportunity cost of money=15% per year

Inventory holding cost per year =8%

Material cost for one job =$750

Administrative order cost (S) =$100

Material cost per year = $ Annual demand * Material cost for one job =$ 3080*750 =$23,10,000

Inventory holding cost per year =$23,10,000 * 8/100 =$ 1,84,800

Inventory holding cost/unit/year (H) =1,84,800/3080 =$60

We have the formula for EOQ

EOQ =Sq Root (2SD/H)=Sq.Root ( 2*100*3080/60)=Sq.Root ( 10266.66)=101.32 =101 (Round Fig)

EOQ = 101 Jobs

Please note that EOQ is independent of oppurtunty cost .That means whtever be the oppurtunity cost economic order quantity will not change.

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