Answer to Question #267290 in Management for love

Question

Riex Blocks – “Hastang gahi a” specialized in the manufacturing of high-rise CHB (concrete hollow blocks). The company makes a semi-annual order for 2,400 sacks of cement at a unit price of 250.00. Its carrying cost per year is estimated at 7% of the price of concrete block. While the cost of preparing a requisition, a purchase order and receiving tickets, stocking the items when they arrive m processing the supplier’s invoice and remitting the payment to the supplier is 145 per order per year. What is the economic order quantity? and how many orders should be made each year?

Answer 1

EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.

Economic order quantity is a method of inventory control. It refers to the optimal amount of securities a company would acquire to meet demand while lowering retention and holding costs. Economic Order Quantity (EOQ) only applies when an item's consumption is stable over the year and every new sale is fully fulfilled as inventory hits zero.

Regardless of the number of modules ordered, each request has a set price; orders are only regarded to comprise one item. There is also a retention cost for each item retained in conserving, which is sometimes expressed as a percentage of the product's purchase price. While the Economic Order Quantity (EOQ) computation is straightforward, there are a few factors to consider in actuality, such as shipping costs and quantity discounts.