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 ...Show more

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
Save Your Time for More Important Things
Let us write or edit the assignment on your topic
"Economic Order Quantity"
with a personal 20% discount.
Grab the best paper

Related Essays

SLP 1- Introduction to Managerial Accounting
Managements’ functions within an organization are planning, controlling, leading, arranging, staffing and decision making. Management accounting practices and records for a company are designed and operated in a way to help managers perform their functions easily.
3 pages (750 words) Essay
Management accounting for business decisions Trailer Construct plc
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.
6 pages (1500 words) Coursework
Working Capital.Costs associated with inventory.
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 (500 words) Essay
Industries using Economic Order Quantity
This is because some of the drugs have strict expiry dates, and mistakes in inventory management could lead to huge losses or disaster (Krajewski, and Ritzman 71). In this respect, the pharmaceutical wholesalers need a method of inventory that will
3 pages (750 words) Essay
Alden, Inc
The lack of a mechanism to forecast sales and only depend on the monthly physical count may result to losses when demand increases within a certain period and may be taken advantage of by the employees for lack of a
1 pages (250 words) Case Study
INTRODUCTION TO QUANTITATIVE MANAGEMENT
They include incremental money of tied up capital, incremental insurance costs, incremental warehouse and storage costs, the cost of depreciation ii. Using the Excel Random number generation data analysis I have generated
5 pages (1250 words) Lab Report
Cost Accounting and the objectives
They are necessary for a decision. They are cash flows that arise from the direct consequence of the taken decision. They arise also incremental. However, irrelevant costs or revenues are not required for decisions to be made. Examples of such
2 pages (500 words) Essay
Find out how much would it cost
to get a custom paper written by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT