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Hello sir,
I am not clear about calculating of EOQ,holding cost and ordering cost.I am not clear about this question.It says,”What would be the effect on the EOQ and the total annual ordering cost of an increase in the annual cost of holding one unit of the component in inventory?”Could you please explain in details?I will be very thankful to you sir.I hope to hearing the answer from you asap.Thanksfully,
AUNG NAING MOEWith regard to calculating the EOQ etc (which you are not clear about) – have you watched our free lecture on inventory control??
With regard to the effect of an increase in the annual holding cost, have a look at the formula. If Ch increases, then the bottom of the equation increases which will mean the result (the EOQ) will be smaller i.e. it will decrease.
If the EOQ is smaller then it will mean more orders need to be placed each year. If more orders are placed then the annual ordering cost will increase.
For more detail you really need to watch the lecture.
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