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Economic Order quantity opgave 21-15 Tijn van der Zant.

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Presentation on theme: "Economic Order quantity opgave 21-15 Tijn van der Zant."— Presentation transcript:

1 Economic Order quantity opgave Tijn van der Zant

2 How to calculate EOQ EOQ = √(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 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 = P = 120 C = 2 EOQ = √(2*12000*120/2) = 1200

5 Total annual relenant costs (TRC) Total annual relevant cost (TRC) = DP/Q+QC/2 Where Q = quantity and in this example I assume it’s the same as EOQ (though that’s not necessary

6 Calculate total ordering and carrying costs using EOQ DP/Q+QC/2 = 12000*120/ *2/2 = * 1/ = = ₤ 2400

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


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