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Model eoq

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eoq

eoq

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  • 1. Name Roll no. Divya Dadheech……………… Divya Ranamt………………… Ekta Manik……………………. Rutuja …………………………….. Poulami Sarkar……………… Rushabh Chandan………… 14 16 17 19 20 24
  • 2. EOQ Model
  • 3.  INTRODUCTION OF EOQ  DEFINITION OF EOQ
  • 4.  Uniform/Constant Demand  Constant Unit Price  Constant Carrying Cost  Constant Ordering Cost  Instant Delivery  Availability of Funds
  • 5. How much inventory should we order each month? The EOQ tool can be used to model the amount of inventory that we should order each month.
  • 6. Batch costing
  • 7. • Proper Co-ordination • Centralized Purchasing • Proper Scheduling • Proper Classification • Use of Standard Forms • Safe Storage • Reduce Cost
  • 8. How EOQ Works ? The Principles Behind EOQ: The Total Cost Curve & 
  • 9. The Principles Behind EOQ: The Holding Costs  Keeping inventory on hand  Interest  Insurance  Taxes  Theft  Obsolescence  Storage Costs
  • 10.  Interest…………….  Obsolescence……..  Storage……………..
  • 11. The Principles Behind EOQ: The Procurement Costs Primarily the labor costs associated with processing the order:  Ordering and requisition  A portion of the freight if the amount very according to the size of the order  Receiving, inspecting, stocking  Invoice processing
  • 12. Total Cost = Purchase Cost + Order Cost + Holding Cost The Total Cost Formula
  • 13. The Total Cost Formula This represents the unchanging fixed costs P = Purchase cost per unit R = Forecasted monthly usage
  • 14. The Total Cost Formula This represents the variable order costs P = Purchase cost per unit R = Forecasted monthly usage C = Cost per order event (not per unit) Q = The number of units ordered
  • 15. The Total Cost Formula This represents the variable holding costsP = Purchase cost per unit R = Forecasted monthly usage C = Cost per order event (not per unit) Q = The number of units ordered F = Holding cost factor
  • 16. The EOQ Formula Taking the derivative of both sides of the equation and setting equal to zero to find the minimum value of the function, one obtains:
  • 17. The EOQ Formula The result of differentiation The Economic Order Quantity
  • 18.  Tabular Method  Graphical Method  Algebraic Method
  • 19. First, Recall the EOQ Equation: P = Purchase cost per unit R = Forecasted monthly usage C = Cost per order event (not per unit) F = Holding cost factor
  • 20. R = 5200 C = $10 per order P = $2 F = 20% of value of inventory per year
  • 21. R = 5200 C = $10 per order P = $2 F = 20% of value of inventory per year (10)2 (5200) (2 )(.20)
  • 22. EOQ = 510 cases
  • 23.  EOQ is a tool, not a simple solution.  EOQ is useful in determining optimal order quantity  Understand the equation and what you are trying to find  Find accurate inputs for the equation
  • 24.  Fundamentals of Cost Accounting Vipul Prakasharan  http://www.inventoryops.com/economic_or der_quantity.htm  http://en.wikipedia.org/wiki/Economic_ord er_quantity  Cost Accounting - V.K.Saxene

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