Question

Demand for a product is 500 units per month. The company incurs a fixed order placement, transportation, and receiving cost of 4,000 each time an order is placed. Each cycle costs 500 and the retailer has a holding cost of 20 percent. Evaluate the number of products that the store manager should order in each replenishment lot?

Answer 1

Economic Order Quantity is the level of inventory that minimizes the total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models. Economic order quantity refers to that number (quantity) ordered in a single purchase so that the accumulated costs of ordering and carrying costs are at the minimum level. In other words, the quantity that is ordered at one time should be so, which will minimize the total of. Cost of placing orders and receiving the goods, and Cost of storing the goods as well as interest on the capital invested.

economic order quantity (EOQ)