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# Model eoq

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### Model eoq

1. 1. Name Roll no. Divya Dadheech……………… Divya Ranamt………………… Ekta Manik……………………. Rutuja …………………………….. Poulami Sarkar……………… Rushabh Chandan………… 14 16 17 19 20 24
2. 2. EOQ Model
3. 3.  INTRODUCTION OF EOQ  DEFINITION OF EOQ
4. 4.  Uniform/Constant Demand  Constant Unit Price  Constant Carrying Cost  Constant Ordering Cost  Instant Delivery  Availability of Funds
5. 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. 6. Batch costing
7. 7. • Proper Co-ordination • Centralized Purchasing • Proper Scheduling • Proper Classification • Use of Standard Forms • Safe Storage • Reduce Cost
8. 8. How EOQ Works ? The Principles Behind EOQ: The Total Cost Curve & 
9. 9. The Principles Behind EOQ: The Holding Costs  Keeping inventory on hand  Interest  Insurance  Taxes  Theft  Obsolescence  Storage Costs
10. 10.  Interest…………….  Obsolescence……..  Storage……………..
11. 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. 12. Total Cost = Purchase Cost + Order Cost + Holding Cost The Total Cost Formula
13. 13. The Total Cost Formula This represents the unchanging fixed costs P = Purchase cost per unit R = Forecasted monthly usage
14. 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. 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. 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. 17. The EOQ Formula The result of differentiation The Economic Order Quantity
18. 18.  Tabular Method  Graphical Method  Algebraic Method
19. 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. 20. R = 5200 C = \$10 per order P = \$2 F = 20% of value of inventory per year
21. 21. R = 5200 C = \$10 per order P = \$2 F = 20% of value of inventory per year (10)2 (5200) (2 )(.20)
22. 22. EOQ = 510 cases
23. 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. 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