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EOQ Analysis

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Tiger Corporation purchases 1,200,000 units per year of one component. The fixed cost per order is $25. The annual carrying cost of the item is 27% of its $2 cost.
a) Determine the EOQ under each of the following conditions: (1) no changes (2) order cost of zero, and (3) carrying cost of zero.

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EOQ = SQRT[(2 x demand x ordering cost / carrying cost)]

1) no changes = sqrt(2 x 1,200,000 x 25 / 27%*$2)

= ...

Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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