Economic order quantity - Revision history

imported>Doug Williamson: Add link.

2021-03-10T17:00:16Z

Add link.

← Older revision		Revision as of 17:00, 10 March 2021
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	== See also ==		== See also ==
	* [[Just in time]]		* [[Just in time]]
			* [[Order]]
	* [[Stock]]		* [[Stock]]

	[[Category:Accounting,_tax_and_regulation]]		[[Category:Accounting,_tax_and_regulation]]

imported>Doug Williamson: Add category.

2020-10-08T14:59:21Z

Add category.

← Older revision		Revision as of 14:59, 8 October 2020
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	* [[Just in time]]		* [[Just in time]]
	* [[Stock]]		* [[Stock]]

			[[Category:Accounting,_tax_and_regulation]]

imported>Doug Williamson: Improve calculations.

2016-01-15T20:41:48Z

Improve calculations.

← Older revision		Revision as of 20:41, 15 January 2016
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	Expressed as a formula:		Expressed as a formula:

	EOQ = ( 2FD / H )<sup>(1/2)</sup>		EOQ = (2FD / H)<sup>(1/2)</sup>


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	In this case:		In this case:

	EOQ = ( 2FD / H )<sup>(1/2)</sup>		EOQ = (2FD / H)<sup>(1/2)</sup>

	= ( 2 x £20 x 100 / £40 )<sup>(1/2)</sup>		= (2 x £20 x 100 / £40)<sup>(1/2)</sup>

	= 10 units per order.		= 10 units per order.

imported>Doug Williamson: Standardise appearance of page.

2015-03-15T13:10:23Z

Standardise appearance of page.

← Older revision		Revision as of 13:10, 15 March 2015
Line 9:		Line 9:
	Expressed as a formula:		Expressed as a formula:

	EOQ = ( 2FD / H )<sup>1/2</sup>		EOQ = ( 2FD / H )<sup>(1/2)</sup>


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	'''~~For example:~~'''		'''Example 1'''

	In this case;		In this case:

	EOQ = ( 2FD / H )<sup>1/2</sup>		EOQ = ( 2FD / H )<sup>(1/2)</sup>

	= ( 2 x £20 x 100 / £40 )<sup>1/2</sup>		= ( 2 x £20 x 100 / £40 )<sup>(1/2)</sup>

	= 10 units per order.		= 10 units per order.
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	'''~~<u>Proof</u>:~~'''		'''Example 2'''

	Total costs would be greater with any other number of units per order (other than the EOQ of 10 units calculated above), for example:		Total costs would be greater with any other number of units per order (other than the EOQ of 10 units calculated above), for example:

imported>Doug Williamson: Align presentation of formula with qualification material

2015-03-14T15:51:44Z

Align presentation of formula with qualification material

← Older revision		Revision as of 15:51, 14 March 2015
Line 3:		Line 3:
	(EOQ).		(EOQ).

	The optimal size of orders and frequency for ordering stocks or raw materials based on the periodic demand (D), the fixed ordering cost (F) and the periodic holding cost (H) of the item of stock in question.		The optimal size of orders and frequency for ordering stocks or raw materials based on the periodic demand (D), the fixed ordering cost (F) and
			the periodic holding cost (H) of the item of stock in question.


	Expressed as a formula:		Expressed as a formula:

	EOQ = (2FD/H)<sup>1/2</sup>		EOQ = ( 2FD / H )<sup>1/2</sup>


	Where:		Where:
Line 18:		Line 21:


	In this case:		'''For example:'''

			In this case;

	EOQ = (2FD/H)<sup>1/2</sup>		EOQ = ( 2FD / H )<sup>1/2</sup>

	= (2 x £20 x 100/£40)<sup>1/2</sup>		= ( 2 x £20 x 100 / £40 )<sup>1/2</sup>

	= 10 units per order.		= 10 units per order.
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	With this size of order, the average number of orders per year would be		With this size of order, the average number of orders per year would be

	100/10 = 10 orders.		100 / 10 = 10 orders.


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	Average stock levels would be		Average stock levels would be

	10/2 = 5 units.		10 / 2 = 5 units.


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	= £200 + £200		= £200 + £200

	= £400.		'''= £400.'''


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	the average number of orders per year would be		the average number of orders per year would be

	100/9 = 11.111 orders.		100 / 9 = 11.111 orders.


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	Average stock levels would be		Average stock levels would be

	9/2 = 4.5 units.		9 / 2 = 4.5 units.


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	= £222 + £180		= £222 + £180

	= £402.		'''= £402.'''


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	the average number of orders per year would be		the average number of orders per year would be

	100/11 = 9.0909 orders.		100 / 11 = 9.0909 orders.


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	Average stock levels would be		Average stock levels would be

	11/2 = 5.5 units.		11 / 2 = 5.5 units.


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	= £180 + £222		= £180 + £222

	= £402.		'''= £402.'''

imported>Doug Williamson: Updated entry. Source ACT Glossary of terms

2014-11-19T16:44:06Z

Updated entry. Source ACT Glossary of terms

@@ Line 6: / Line 6: @@
 Expressed as a formula:
 EOQ = (2FD/H)<sup>1/2</sup>
 Where:
 F = the Fixed cost per order (eg £20)
 D = the annual Demand, or usage, of the item (eg 100 units)
 H = annual Holding cost per unit of the item (eg £40)
 In this case:
 EOQ = (2FD/H)<sup>1/2</sup>
 = (2 x £20 x 100/£40)<sup>1/2</sup>
 = 10 units per order.
-<u>Proof</u>:
+With this size of order, the average number of orders per year would be
 Total costs would be greater with any other number of units per order (other than the EOQ of 10 units calculated above), for example:
 With 11 units per order, the average number of orders per year would be 100/11 = 9.0909 orders.
-Total annual ordering costs = 9.0909 orders x £20/order = £182.
+''With 9 units per order,''
 Average stock levels would be 11/2 = 5.5 units.
-Total annual stock holding costs = 5.5 units x £40/unit = £220.
+the average number of orders per year would be
 Grand total costs = £180 + £222 = £402.

imported>Doug Williamson: Spacing

2013-08-13T20:02:22Z

Spacing

← Older revision		Revision as of 20:02, 13 August 2013
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	''Management accounting''.		''Management accounting''.
	(EOQ).
			(EOQ).

	The optimal size of orders and frequency for ordering stocks or raw materials based on the periodic demand (D), the fixed ordering cost (F) and the periodic holding cost (H) of the item of stock in question.		The optimal size of orders and frequency for ordering stocks or raw materials based on the periodic demand (D), the fixed ordering cost (F) and the periodic holding cost (H) of the item of stock in question.

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	* [[Just in time]]		* [[Just in time]]
	* [[Stock]]		* [[Stock]]

imported>Administrator: CSV import

2012-10-23T14:19:28Z

CSV import

New page

''Management accounting''.
(EOQ).
The optimal size of orders and frequency for ordering stocks or raw materials based on the periodic demand (D), the fixed ordering cost (F) and the periodic holding cost (H) of the item of stock in question.

Expressed as a formula:
EOQ = (2FD/H)1/2
Where:
F = the Fixed cost per order (eg £20)
D = the annual Demand, or usage, of the item (eg 100 units)
H = annual Holding cost per unit of the item (eg £40)

In this case:
EOQ = (2FD/H)1/2
= (2 x £20 x 100/£40)1/2
= 10 units per order.

With this size of order, the average number of orders per year would be 100/10 = 10 orders.
Total annual ordering costs = 10 orders x £20/order = £200.
Average stock levels would be 10/2 = 5 units.
Total annual stock holding costs = 5 units x £40/unit = £200.
Grand total costs = £200 + £200 = £400.

Proof:
Total costs would be greater with any other number of units per order (other than the EOQ of 10 units calculated above), for example:
With 9 units per order, the average number of orders per year would be 100/9 = 11.111 orders.
Total annual ordering costs = 11.111 orders x £20/order = £222.
Average stock levels would be 9/2 = 4.5 units.
Total annual stock holding costs = 4.5 units x £40/unit = £180.
Grand total costs = £222 + £180 = £402.

With 11 units per order, the average number of orders per year would be 100/11 = 9.0909 orders.
Total annual ordering costs = 9.0909 orders x £20/order = £182.
Average stock levels would be 11/2 = 5.5 units.
Total annual stock holding costs = 5.5 units x £40/unit = £220.
Grand total costs = £180 + £222 = £402.

== See also ==
* [[Just in time]]
* [[Stock]]