Economic Order Quantity - Assignment Example

Extract of sample
Economic Order Quantity

The result of such specificity is that there is a smooth re-stocking process that enhances customer service as stock-outs are minimized.
The EOQ model involves the use of mathematical calculations which may at times be complicated for small business owners that may lack in math skills. It also requires data that has sufficient detail. The basis of the model is the assumption that the pattern of demand would be constant throughout the year and inventory usage is at a fixed rate. It fails to account for fluctuations. The assumption that costs remain constant is also faulty as the costs vary depending on the economic situation. It also limits how a business can take advantage of discounts that suppliers offer on quantity purchases. That is because it offers the ordering of similar amounts every time.
Finkler, S. A., Purtell, R.M., Calabrese, T.D., & Smith, D.L. (2013). Financial management for public, health, and not-for-profit organizations (4th ed.). Upper Saddle River, NJ: Pearson Prentice ...
Download paper

Summary

It determines the most economical quantity to purchase per order taking into consideration the prevailing ordering costs as well as the holding costs. To minimize ordering costs and take advantage of discounts associated with…
Author : lstamm
Download 1

Related Essays

SLP 1- Introduction to Managerial Accounting
Walmart is one of the largest retail outlets' operator, operating approximately ten thousand stores in 27 different countries. The paper emphasize on the role of management accounting in multinational companies. Introduction to Management Accounting Management Accounting Management accounting is a branch of accounting, which collects information about a company's overall management mannerisms and suggests specific measures to promote further reformation. Among other things, the roles of management include planning, controlling, leading, organizing, staffing and decision making. In order to...
3 pages (753 words) Essay
Management accounting for business decisions Trailer Construct plc
The Trailer Construct PLC is a small family business which is in the process of expansion into a higher level of operations. The enterprise is involved in the construction and repair of trailers custom made according to the specifications of the client. The demand for construction of new trailers has been consistently rising through the five years to 2011, although demand for repair remained consistent throughout the same period. As a result, the company decided to raise its production level, however its policies and practices remained the same.Trailor Construct’s problem is comprised of a...
6 pages (1506 words) Coursework
Working Capital.Costs associated with inventory.
Working Capital refers to the current cash a company holds to pay off the costs for its daily operations, and uses it to finance the manufacture of the desired product from the raw materials.The most important assets involved in Working Capital are inventory, accounts payable and, receivable. These items indicate the firm's financial position. (McClure, 2008).If a company extends credit to its customers, and they are not able to pay off their invoices on time, working capital of the company gets trapped; meaning that it is part of accounts receivable but cannot be used for immediate purposes....
2 pages (502 words) Essay
Industries using Economic Order Quantity
In this sense, distributors of the pharmaceuticals to improve efficiency in the distribution and minimize the ordering and holding costs that are very high in the industry have often used the Economic Order Quantity. An estimated savings of more than $200, 000 was reported by those industries that utilized effective inventory management techniques in their ordering and determination of optimum quantities to be reordered by the company (Siegel, and Shim 203).
...
3 pages (753 words) Essay
Alden, Inc
Presenting a receiving report to the supplies is important I an organization to acknowledge receipt of the materials to avoid challenges with supply.
...
1 pages (251 words) Case Study
INTRODUCTION TO QUANTITATIVE MANAGEMENT
The number of variables being five and the number of random numbers being
5 pages (1255 words) Lab Report
Cost Accounting and the objectives
Relevant revenues/costs show future costs/revenues that will change by the decision taken while irrelevant costs/revenues are not affected by the decision. Inclusion of both quantitative and qualitative data ensures that an informed decision is made. This is because it ensures that all factors are taken into consideration.
...
2 pages (502 words) Essay
Got a tricky question? Receive an answer from students like you! Try us!