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Lot-for-lot, economic order quantity, and least total cost

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Please help with the following accounting problem:

An item has a setup cost of $100 and a weekly holding cost of $0.50 per unit. Given the following net requirements, what should the lot sizes be using lot-for-lot (L4L), economic order quantity (EOQ) and least total cost (LTC)? Also, what is the total cost associated with each lot-sizing technique?

Period (in weeks) 1 2 3 4 5 6 7 8 Total
Gross Requirement 10 30 10 50 20 40 50 30

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Solution Summary

This solution provides a complete computation of the given accounting problem in Excel.

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** Please see the attached file for the complete solution response **

SET Up cost $100
Holding Cost $0.50

Period 1 2 3 4 5 6 7 8
Gross Requirement 10 30 10 50 20 40 50 30

1) L4L
Assuming lead time is 0 weeks (we get the item as soon as it is ordered)
Assuming no safety stock (demand is stable and known)
Total
Period 1 2 3 4 5 6 7 8
Order 10 30 10 50 20 40 50 30 240
Holding Cost $- $- ...

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