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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?

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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 ...

#### Solution Summary

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

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