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hi,
hope you doing good.
in computing for order quantity we had ignored the purchase price on assumption that it won’t change with orders. what if the price have changed over the year(say maybe due to inflation or the components have high demand and the supplier decided to raise the price…could be anything) therefore end up paying more/less for the late orders. so there would have been potential cost saving when more orders were placed during periods of low price.
thanks,john.What you have written is true, but is not something that could be taken into account if using an EOQ approach to deciding on an order quantity (given that we would not know in advance if the cost was going to change). If you got the chance in the exam you could mention that it might not be sensible for them to use an EOQ approach in the circumstances, but it could not be part of the EOQ arithmetic.
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