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Outline the assumptions of Economic Order Quantity (EOQ)

Outline the assumptions of Economic Order Quantity (EOQ).

Answers

Judy
1. A known constant stock holding cost.

2. A known ordering cost.

3. The rate of demand is known.

4. A known constant price per unit.

5. Inventory replenishment is done instantaneously.

6. No stock- out is allowed.

7. Quantity discounts are not allowed.

8. Lead time is known and fixed.

eq1582019207.png
- The EOQ point is
a) The minimum point of the total cost curve hence calculus can be used to determine EOQ by determining the turning point of the total cost curve.
b) EOQ point is also given by the point of intersection between holding cost ordering cost i.e. at EOQ holding cost is equal to ordering cost.
EOQ formula
Mathematical derivation of EOQ using calculus let:
Cost per order be CO
Annual demand be D
Quantity per order Q
Holding cost per unit CH
eq2582019207.png
eq3582019207.png
Judiesiz answered the question on May 8, 2018 at 16:47

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