company buys, 90000 Shipping container every year container every year and cosys are as follows
(1 )cost of container = rs 500 /piece
(2 )cost of order placement = rs 90 /order
(3 )inventory carrying costs =20% calculate
(1 )eoq and (2) total number to be placed
Answers
Explanation:
Definitions
Economic Order Quantity (EOQ) is the order quantity that minimizes total inventory costs.
Order Quantity is the number of units added to inventory each time an order is placed.
Total Inventory Costs is the sum of inventory acquisition cost, ordering cost, and holding cost.
Ordering Cost is the cost incurred in ordering inventory from suppliers excluding the cost of purchase such as delivery costs and order processing costs.
Holding Cost, also known as carrying cost, is the total cost of holding inventory such as warehousing cost and obsolescence cost.
Explanation
Total inventory cost is comprised of the following main costs:
Cost of purchase
Order Costs
Holding Costs
If we change the order quantity, it can affect the different types of inventory costs in different ways.
Larger order size results in lower order costs because fewer orders need to be placed to cover the annual demand. This however results in higher holding costs because of the increase in inventory levels.