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Urgent “Economic Order Quantity” Please Help

Forums › ACCA Forums › ACCA MA Management Accounting Forums › Urgent “Economic Order Quantity” Please Help

  • This topic has 2 replies, 2 voices, and was last updated 13 years ago by haymd1.
Viewing 3 posts - 1 through 3 (of 3 total)
  • Author
    Posts
  • July 3, 2011 at 5:29 pm #49231
    haymd1
    Member
    • Topics: 9
    • Replies: 26
    • ☆

    I am sharing in here a question of my assignment please help me out in this
    Ch……$1.75/unit
    Co……$225
    Annual Demand 10000 units.
    Purchase price $20/unit
    EOQ ?

    supplier is offering the discount on bulk purchases
    Details are
    10000 units


    $17/unit
    5000 units


    $ 17.85/unit
    2500 units


    $ 18.25
    1000 units


    $ 20/unit
    Required: Cost minimizing ordering cost.
    Give me the full solution of this question please.
    Thanking you…

    July 17, 2011 at 11:26 am #85768
    mrjonbain
    Moderator
    • Topics: 6
    • Replies: 2425
    • ☆☆☆☆☆

    EOQ=Square root of (2CoD/Hc)
    = square root of (2x225X10000/1.17)
    =1500
    cost using this approach (assuming business continuing therefore allowing calculation of fractions of orders)
    =unit cost + holding cost + ordering cost
    unit cost =20×10000
    holding cost=1500/2 x 1.75=1312.5
    no. of orders a year =10000/1500=6.6666666 orders a year
    so ordering cost =6.66666…x225=1500
    total cost=200000+1312.5+1500=202812.5 per year

    calculation as above for discounts but assuming maximum of 10000 annual demand is maximum stock needed
    1000 units
    no. of orders=10 since 10000/1000=10 orders per year
    ordering cost =225×10=2250
    holding cost=1000/2 x 1.75=875
    unit cost=200000 as above
    total cost =203125

    For 2500 units
    unit cost=10000×18.25=182500
    no. of orders a year=10000/2500=4 per year
    ordering cost=225×4=900
    holding cost=2500/2 x1.75=2187.5
    total cost=900+182500+2187.5=185587.5

    For 5000 units
    Unit cost=10000×17.85=178500
    no. of orders=10000/5000=2
    ordering cost=2×225=450
    holding cost=5000/2 x 1.75=4375
    total cost=178500+450+4375=183325

    For 10000 units
    Unit cost=100000×17=170000
    no. of orders =10000/10000=1
    ordering cost=225
    holding cost=10000/2×1.75=8750
    total cost=170000+225+8750=178975
    Total cost minimised by ordering 10000 units.

    July 18, 2011 at 3:27 pm #85769
    haymd1
    Member
    • Topics: 9
    • Replies: 26
    • ☆

    thanks buddy

  • Author
    Posts
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