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I am struggling with calculating the economic ordering quantity for questions that have a discount percentage on the cost of the goods, as well as a percentage holding cost associated with the various costs. For example the following question:
Annual demand = 500
Order Cost = £30
Holding cost = annual rate of 20%
Pricing plan:
0-99 = £36
100-199 = £32
200-399 = £30
400+ = £28How would the EOQ be calcualted for this question?
You need to solve the EOQ equation using the highest pruce and then calculate the total annual cost (annual demand * price + holding cost * average inventory). Then calculate the total annual cost of the quantities above that, using the lowest one. The option with the lowest annual cost is the best. E.g. if EOQ is 150, try 200 and 400.
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