Model eoq
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This document discusses the economic order quantity (EOQ) model. It begins with an introduction and definitions of EOQ. It then outlines the assumptions of the EOQ model including constant demand, price, carrying costs, ordering costs, and instant delivery. The document explains that EOQ can be used to determine the optimal inventory order quantity each month by minimizing total costs. It presents the total cost formula considering purchase, order, and holding costs. The document provides an example calculation to demonstrate finding the EOQ. It closes with cautions on using EOQ as a tool rather than a simple solution and emphasizes understanding the equation and inputs.
Model eoq
- 2. Name Roll no. Divya Dadheech……………… Divya Ranamt………………… Ekta Manik……………………. Rutuja …………………………….. Poulami Sarkar……………… Rushabh Chandan………… 14 16 17 19 20 24
- 3. EOQ Model
- 4. INTRODUCTION OF EOQ DEFINITION OF EOQ
- 5. Uniform/Constant Demand Constant Unit Price Constant Carrying Cost Constant Ordering Cost Instant Delivery Availability of Funds
- 7. How much inventory should we order each month? The EOQ tool can be used to model the amount of inventory that we should order each month.
- 9. • Proper Co-ordination • Centralized Purchasing • Proper Scheduling • Proper Classification • Use of Standard Forms • Safe Storage • Reduce Cost
- 11. How EOQ Works ? The Principles Behind EOQ: The Total Cost Curve &
- 12. The Principles Behind EOQ: The Holding Costs Keeping inventory on hand Interest Insurance Taxes Theft Obsolescence Storage Costs
- 13. Interest……………. Obsolescence…….. Storage……………..
- 14. The Principles Behind EOQ: The Procurement Costs Primarily the labor costs associated with processing the order: Ordering and requisition A portion of the freight if the amount very according to the size of the order Receiving, inspecting, stocking Invoice processing
- 15. Total Cost = Purchase Cost + Order Cost + Holding Cost The Total Cost Formula
- 16. The Total Cost Formula This represents the unchanging fixed costs P = Purchase cost per unit R = Forecasted monthly usage
- 17. The Total Cost Formula This represents the variable order costs P = Purchase cost per unit R = Forecasted monthly usage C = Cost per order event (not per unit) Q = The number of units ordered
- 18. The Total Cost Formula This represents the variable holding costsP = Purchase cost per unit R = Forecasted monthly usage C = Cost per order event (not per unit) Q = The number of units ordered F = Holding cost factor
- 19. The EOQ Formula Taking the derivative of both sides of the equation and setting equal to zero to find the minimum value of the function, one obtains:
- 20. The EOQ Formula The result of differentiation The Economic Order Quantity
- 21. Tabular Method Graphical Method Algebraic Method
- 24. First, Recall the EOQ Equation: P = Purchase cost per unit R = Forecasted monthly usage C = Cost per order event (not per unit) F = Holding cost factor
- 25. R = 5200 C = $10 per order P = $2 F = 20% of value of inventory per year
- 26. R = 5200 C = $10 per order P = $2 F = 20% of value of inventory per year (10)2 (5200) (2 )(.20)
- 27. EOQ = 510 cases
- 28. EOQ is a tool, not a simple solution. EOQ is useful in determining optimal order quantity Understand the equation and what you are trying to find Find accurate inputs for the equation
- 29. Fundamentals of Cost Accounting Vipul Prakasharan http://www.inventoryops.com/economic_or der_quantity.htm http://en.wikipedia.org/wiki/Economic_ord er_quantity Cost Accounting - V.K.Saxene