Economic Order Quantity Flashcards
1
Q
Q
A
number of units per order
2
Q
Q*
A
optimum number of units per order
3
Q
D
A
annual demand in units for inventory time
4
Q
S
A
setup or ordering cost for each order (£)
5
Q
H
A
holding/carrying costs per unit per year
6
Q
Optimum Order Quantity
A
Q* = √((2×D×S)/H))
7
Q
Order Times Per Year
A
D/Q*
8
Q
Annual Ordering Cost
A
(S×D)/Q*
9
Q
Annual Carrying Cost
A
(Q*/2)×H
10
Q
Total Inventory Cost
A
Annual Ordering Cost + Annual Carrying Cost
11
Q
Pre-conditions (Q LORDS)
A
Quantity discounts are not possible
Lead time is known and constant
Only variable costs are ordering and holding
Receipt of inventory is instantaneous and complete
Demand is known, constant, and independent
Stockouts can be completely avoided
