eoq

2. Name Roll no.
Divya Dadheech………………
Divya Ranamt…………………
Ekta Manik…………………….
Rutuja
……………………………..
Poulami Sarkar………………
Rushabh Chandan…………
14
16
17
19
20
24

3. EOQ Model

4.  INTRODUCTION OF EOQ
 DEFINITION OF EOQ

5.  Uniform/Constant Demand
 Constant Unit Price
 Constant Carrying Cost
 Constant Ordering Cost
 Instant Delivery
 Availability of Funds

7. How much inventory
should we order each
month?
The EOQ tool can be
used to model the
amount of inventory that
we should order each
month.

8. Batch costing

9. • Proper Co-ordination
• Centralized Purchasing
• Proper Scheduling
• Proper Classification
• Use of Standard Forms
• Safe Storage
• Reduce Cost

11. How EOQ Works ?
The Principles Behind EOQ: The Total Cost Curve
& 

12. The Principles Behind EOQ: The Holding Costs
 Keeping inventory on hand
 Interest
 Insurance
 Taxes
 Theft
 Obsolescence
 Storage Costs

13.  Interest…………….
 Obsolescence……..
 Storage……………..

14. The Principles Behind EOQ:
The Procurement Costs
Primarily the labor costs associated with
processing the order:
 Ordering and requisition
 A portion of the freight if the amount
very according to the size of the order
 Receiving, inspecting, stocking
 Invoice processing

15. Total Cost = Purchase Cost + Order Cost + Holding Cost
The Total Cost Formula

16. The Total Cost Formula
This represents the
unchanging fixed costs
P = Purchase cost per unit
R = Forecasted monthly usage

17. The Total Cost Formula
This represents the variable
order costs
P = Purchase cost per unit
R = Forecasted monthly usage
C = Cost per order event (not per unit)
Q = The number of units ordered

18. The Total Cost Formula
This represents the variable
holding costsP = Purchase cost per unit
R = Forecasted monthly usage
C = Cost per order event (not per unit)
Q = The number of units ordered
F = Holding cost factor

19. The EOQ Formula
Taking the derivative of both sides of the equation and
setting equal to zero to find the minimum value of the
function, one obtains:

20. The EOQ Formula
The result of differentiation
The Economic Order Quantity

21.  Tabular Method
 Graphical Method
 Algebraic Method

24. First, Recall the
EOQ Equation:
P = Purchase cost per unit
R = Forecasted monthly usage
C = Cost per order event (not per unit)
F = Holding cost factor

25. R = 5200
C = $10 per order
P = $2
F = 20% of value of
inventory per year

26. R = 5200
C = $10 per order
P = $2
F = 20% of value of inventory per year
(10)2 (5200)
(2 )(.20)

27. EOQ = 510 cases

28.  EOQ is a tool, not a simple solution.
 EOQ is useful in determining optimal order
quantity
 Understand the equation and what you are
trying to find
 Find accurate inputs for the equation

29.  Fundamentals of Cost Accounting
Vipul Prakasharan
 http://www.inventoryops.com/economic_or
der_quantity.htm
 http://en.wikipedia.org/wiki/Economic_ord
er_quantity
 Cost Accounting - V.K.Saxene