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  3. a) economic order quantity (eoq) is the order quan

a) Economic Order Quantity (EOQ) is the order quantity that minimises the sum of both...

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Accounting

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a) Economic Order Quantity (EOQ) is the order quantity that minimises the sum of both the holding and ordering costs under the fixed-order quantity system. The formula of the Economic Order Quantity (EOQ) is given below: EOQ=PF2CR where P= Purchase cost per unit R= Forecasted usage (demand) C= Cost per order Q= Number of units ordered F= Holding cost factor Considering the background of the following case study: "The annual demand for an SKU (stock keeping unit) is 10,075 units, and it is ordered quantities of 650 units. Suppose the ordering cost is $30 per order, the holding cost is 20%, and the unit cost is \$15. Suppose the Economic Order Quantity (EOQ) assumptions hold, i.e., constant demand and no shortage." ii) Calculate the average inventory and the number of orders placed per year. iii) Calculate the annual total inventory costs for the given case. (2 marks) iv) Calculate the EOQ and the reordering point with five days lead time. 3 marks) v) Calculate the annual total inventory costs if EOQ is used. (2 marks)

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