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Economic Order quantity

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C = Relevant carrying costs of 1 unit in stock for the same period used in D. Problem: Keep-Kool company. It buys 12000 units CU29 a 50 per unit ... – PowerPoint PPT presentation

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Title: Economic Order quantity


1
Economic Order quantity
  • opgave 21-15
  • Tijn van der Zant

2
How to calculate EOQ
  • EOQ v(2DP/C)
  • Where
  • D Demand in units for a period
  • P Relevant ordering costs per purchase order
  • C Relevant carrying costs of 1 unit in stock
    for the same period used in D

3
Problem Keep-Kool company
  • It buys 12000 units CU29 a 50 per unit
  • 12 annual ROI (return on investment)
  • Carrying cost per unit per year 2
  • Relevant costs per purchase order 120

4
Calculate EOQ for CU29
  • D 12000
  • P 120
  • C 2
  • EOQ v(212000120/2) 1200

5
Total annual relenant costs (TRC)
  • Total annual relevant cost (TRC) DP/QQC/2
  • Where Q quantity and in this example I assume
    its the same as EOQ (though thats not necessary

6
Calculate total ordering and carrying costs using
EOQ
  • DP/QQC/2 12000120/120012002/2
  • 12000 1/10 1200
  • 1200 1200
  • 2400

7
Reorder Point for CU29
  • Reorder point (number of units sold per unit of
    time) (purchase-order lead time)
  • 12000 units per year 300 units a week
  • Lead time 2 weeks
  • Reorder point 300 2 600 units
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