BUSINESS ADMINISTRATION
ACCOUNTING FOR MANAGEMENT
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Economic Ordering Quantity
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Economic Ordering Quality
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Economic Order Quality
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Detailed explanation-1: -Economic order quantity (EOQ) is the ideal quantity of units a company should purchase to meet demand while minimizing inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has been refined over time.
Detailed explanation-2: -Also referred to as ‘optimum lot size, ’ the economic order quantity, or EOQ, is a calculation designed to find the optimal order quantity for businesses to minimize logistics costs, warehousing space, stockouts, and overstock costs. The formula is: EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.
Detailed explanation-3: -Economic Order Quantity is the ideal order quantity a company should purchase for its inventory. This order quantity is that order quantity which minimizes the total holding cost and ordering cost. Was this answer helpful?
Detailed explanation-4: -The EOQ model assumes that demand is constant, and that inventory is depleted at a fixed rate until it reaches zero. At that point, a specific number of items arrive to return the inventory to its beginning level. Since the model assumes instantaneous replenishment, there are no inventory shortages or associated costs.