EOQ model

Question 1

Inventory

Answer 1

idle goods or materials held by an organization to be used in the future

Question 2

constant demand rate assumption

Answer 2

the eoq model is only valid when the demand rate is constant. This means that a constant number of units is taken from the inventory each period of time

Question 3

Holding Costs

Answer 3

are the costs associated with maintaining a given level of inventory. They depend on the size of the inventory.

Question 4

Q

Answer 4

the order quantity

Question 5

Ch (cost of holding one unit in inventory for a time interval)

Answer 5

= IC (I being the percentage charge over the time interval on C the cost of the item)

Question 6

Annual holding cost

Answer 6

1/2QCh (average inventory) * (annual holding cost per unit)

Question 7

D

Answer 7

the yearly* demand

Question 8

Number of orders per year*

Answer 8

D/Q

Question 9

Ordering cost is assumed to be

Answer 9

fixed

Question 10

Annual* Ordering cost

Answer 10

D/Q*Co

Question 11

TC =

Answer 11

(holding cost) + (ordering cost)

Question 12

Q* the minimum total cost ordering quantity formula

Answer 12

sqrt(2DCo/Ch) can also find by finding cp of total cost formula

Question 13

reorder point …… r

Answer 13

(lead time)(lead time demand) r = dm

Question 14

Sensitivity analysis for EOQ

Answer 14

use a table that shows all combinations of small changes