EOQ

This topic has 3 replies, 3 voices, and was last updated 11 years ago by John Moffat.

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February 18, 2015 at 11:17 pm #229108
kssoni
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how to find EOQ if there is lead time. There was question on mock exam.
demand: 7500 units per month
unit cost $5
ordering cost $100 per order
holding cost is 10% of purchase price per year
Lead time 30 days between placing and receiving order.
February 19, 2015 at 8:46 am #229145
John Moffat
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The lead time is not relevant for calculating the EOQ. (It is the time between placing the order and receiving the delivery – it does not affect the quantity ordered, but simply means placing the order before running out of inventory.)
March 18, 2015 at 8:30 pm #233218
Jess
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sorry to hi-jack this post, but I’m struggling to work out the EOQ on this question, the answer is 6,000 but for some reason I cannot get there!
Can you help at all?
March 18, 2015 at 8:39 pm #233220
John Moffat
Keymaster
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The demand: D = 7,500 x 12 = 90,000
The ordering cost = Co = 100
The holding cost = Ch = 10% x 5 = 0.50
If you put those figures in the formula, then you will get 6,000 🙂
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