Arka Bose (None) (313 Points)
26 March 2010Find EOQ and Annual demand from the following:
Lead time and consumption are constant and safety stock is Rs 10000.
Maximum Level is 4 times the safety stock and carrying cost is 20% per annum.The carrying cost at optimum order size is Rs 6000 which also includes the carrying cost of safety stock.
Cost of placing an order is Rs 6000.
ViveK
(.)
(312 Points)
Replied 27 March 2010
carrying cost =20% of avg inventory
avg inventory=carrying cost/20%
=6000/20%
= 30000
value per order =2 * 30000= 60000
annual demand=x
EOQ=under root (2 *x*6000/.20)
60000*60000=2*x*6000/.20
by solving this annual demand =60000
verify
at EOQ carrying cost=ordering cost=6000
i think this is correct??
Arka Bose
(None)
(313 Points)
Replied 27 March 2010
we can obviously see that TCC=TOC when Q=Rs60000
But from where are u getting this Rs60000? where did u get this formula? Value Per order=2x30000=Rs 60000?
ViveK
(.)
(312 Points)
Replied 27 March 2010
there is no need for any formula or u can say just go in reverse order to what u use to do for calculating total carrying cost
its total carrying cost= 20% of stock (its calculated on avg. stock)
and avg. stock is half the order/EOQ/optimum order etc
Arka Bose
(None)
(313 Points)
Replied 27 March 2010
well,then something must be wrong, Max Level=Ordering Level+EOQ-CxL+Safety Stock,so if we put the same,the equation is not followed up as it says Max Level=4 times the Safety Stock
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