Question

1. What two costs are involved when calculating economic order quantity (EOQ)?
2. Why might it make sense to apply the “80/20 rule” to inventory management?
3. What are some options of dealing with dead inventory?

plz put number in front of the answers.

Answer 1

1. Economic order quantity (EOQ) is the perfect order quantity an organization should buy for its stock given a set cost of creation, a specific interest rate, and different factors. This is done to limit stock holding costs and order-related costs. It is an estimation utilized in the field of Operations, Logistics, and Supply Management. Generally, EOQ is an instrument used to decide the volume and recurrence of orders required to fulfill a given dimension of interest while limiting the cost per order.

The segments of the recipe that make up the all out cost per order are the cost of holding stock and the cost of ordering that stock.

Ordering Cost

The quantity of orders that happen every year can be found by partitioning the yearly interest by the volume per order. The recipe can be communicated as: For each order with a fixed cost that is autonomous of the quantity of units, S, the yearly ordering cost is found by increasing the quantity of orders by this fixed cost. It is communicated as:

Holding Cost

Holding stock regularly accompanies its very own costs. This cost can be as immediate costs caused by financing the capacity of said stock or the open door cost of holding stock as opposed to putting the cash tied up in stock somewhere else. All things considered, the holding cost per unit is frequently communicated as the cost per unit increased by the loan fee, communicated as pursues:

H = iC