Purchase Solution

Readily Attainable EOQ Assumptions

Not what you're looking for?

Ask Custom Question

The EOQ model has a number of assumptions. List them and explain whether they are readily attainable. For example, will the adjustment for quantity discounts easily work?

Purchase this Solution
Solution Summary

400+ words explains which assumptions of this costing model are practical and why.

Solution Preview

Costing

The EOQ model has a number of assumptions. List them and explain whether they are readily attainable. For example, will the adjustment for quantity discounts easily work?

EOQ

Economic order quantity is the ordering level of the quantity at which the cost per unit is minimum.

Formula for computing EOQ:
EOQ= Root Of 2*Annual quantity*ordering cost
Carrying cost

Assumptions of EOQ:
1. Demand is known with certainty
2. Demand is relatively constant over time
3. No shortages are allowed
4. Lead time for the receipt of orders is constant
5. The order quantity is received all at once
6. Fixed item cost
7. Fixed ordering and ...

Purchase this Solution
Free BrainMass Quizzes
Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Introduction to Finance

This quiz test introductory finance topics.

Lean your Process

This quiz will help you understand the basic concepts of Lean.

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

View More Free Quizzes
Related BrainMass Solutions

  • Calculating ordering costs

    EOQ = (2*D*Co/Ch)^0.5 = 60 units Co=(Ch*EOQ^2)/2D=(4*60^2)/(2*240)=30 dollars Ordering cost of $30 will make traditional order optimal Solution describes the steps for calculating ordering cost assuming assumptions of EOQ model holds true.

  • Cash Cycles: Audi

    Determine the EOQ. How many times will you order? What would be the total costs for ordering the cases 1, 6, and 12 times per year? What questionable assumptions are being made by the EOQ model?

  • Inventory Model

    For a particular table, the assumptions of the inventory model with backorders are valid.

  • Calculating Production Runs

    This model is chosen for calculations of EOQ because the data follows all the requirements of the basic EOQ model. Basic EOQ model assumptions are as follows: ? Demand Rate is deterministic and is constant over time. ?

  • Use EOQ or order to meet demand?

    A method like EOQ may not be feasible in practical situations because the assumptions made to arrive at the model may not always be possible to meet.

  • EOQ

    What can go wrong in calculating EOQ. Assumptions of EOQ model: ? Demand for the item is known, deterministic and constant ? Lead time is not considered ? Quantity discounts are not calculated as part of the model ?

  • MCQs on forecasting, inventory

    Consider an inventory situation in which all the EOQ assumptions are met except there are quantity discounts. When a person orders more than the EOQ so that the discount price can be had, which of the following is true? a.

  • Investment in inventory and EOQ

    Determine the EOQ. B.) What would be the total costs for ordering the books 1, 4, 5, 19, and 15 times a year? c.) What questionable assumptions are being made by the EOQ model?

  • EOQ Model : Uses

    531653 Uses EOQ Model What are the uses of the EOQ model? What questionable assumptions are being made by the EOQ model? Please give me some examples to reference. What is working capital management?

View More Related Solutions