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

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Economic Order quantity opgave 21-15 Tijn van der Zant

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

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

Calculate EOQ for CU29 D = 12000 P = 120 C = 2 EOQ = √(2*12000*120/2) = 1200

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

Calculate total ordering and carrying costs using EOQ DP/Q+QC/2 = 12000*120/1200+1200*2/2 = 12000 * 1/10 + 1200 = 1200 + 1200 = ₤ 2400

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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