Inventory Management using EOQ

Holding Cost EOQ

0.3
66.12
Order Cost 160
Total Cost
Unit Cost 61

Demand 250
$16,459.96

Order Quantity Holding Cost Order Cost Material Cost Shortage Cost Total Cost
Q hC(Q/2) (R/Q)S CR (B(Q-n)^2)/2Q TC
4.41 $40.33 $9,074.69 $15,250.00 $0.00 $24,365.02
8.82 $80.66 $4,537.35 $15,250.00 $0.00 $19,868.01
13.22 $121.00 $3,024.90 $15,250.00 $0.00 $18,395.89
17.63 $161.33 $2,268.67 $15,250.00 $0.00 $17,680.00
22.04 $201.66 $1,814.94 $15,250.00 $0.00 $17,266.60
26.45 $241.99 $1,512.45 $15,250.00 $0.00 $17,004.44
30.86 $282.32 $1,296.38 $15,250.00 $0.00 $16,828.71
35.26 $322.66 $1,134.34 $15,250.00 $0.00 $16,706.99
39.67 $362.99 $1,008.30 $15,250.00 $0.00 $16,621.29
44.08 $403.32 $907.47 $15,250.00 $0.00 $16,560.79
48.49 $443.65 $824.97 $15,250.00 $0.00 $16,518.62
52.89 $483.98 $756.22 $15,250.00 $0.00 $16,490.21
57.30 $524.32 $698.05 $15,250.00 $0.00 $16,472.37
61.71 $564.65 $648.19 $15,250.00 $0.00 $16,462.84
66.12 $604.98 $604.98 $15,250.00 $0.00 $16,459.96
70.53 $645.31 $567.17 $15,250.00 $0.00 $16,462.48
74.93 $685.64 $533.81 $15,250.00 $0.00 $16,469.45
79.34 $725.98 $504.15 $15,250.00 $0.00 $16,480.12
83.75 $766.31 $477.62 $15,250.00 $0.00 $16,493.92
88.16 $806.64 $453.73 $15,250.00 $0.00 $16,510.37
92.57 $846.97 $432.13 $15,250.00 $0.00 $16,529.10
96.97 $887.30 $412.49 $15,250.00 $0.00 $16,549.79
101.38 $927.63 $394.55 $15,250.00 $0.00 $16,572.19
105.79 $967.97 $378.11 $15,250.00 $0.00 $16,596.08
110.20 $1,008.30 $362.99 $15,250.00 $0.00 $16,621.29
114.60 $1,048.63 $349.03 $15,250.00 $0.00 $16,647.66
119.01 $1,088.96 $336.10 $15,250.00 $0.00 $16,675.06
123.42 $1,129.29 $324.10 $15,250.00 $0.00 $16,703.39
127.83 $1,169.63 $312.92 $15,250.00 $0.00 $16,732.55
132.24 $1,209.96 $302.49 $15,250.00 $0.00 $16,762.45

Q Line
22 0
22 17266.6
 EOQ Backorder Option
66.12

Total Cost

$16,459.96

Costs per Order Quantity

Column C Column D Column E Column F Column G

$25,000.00

$22,500.00

$20,000.00

$17,500.00

$15,000.00

$12,500.00

$10,000.00

$7,500.00

$5,000.00

$2,500.00

$0.00
0.00 25.00 50.00 75.00 100.00 125.00 150.00
Order Quantity (Q)

Q
150.00
Basic EOQ Model (Analytical Version)
Data Results
D= 6000 (demand/year) Reorder Point 216
K= $115 (setup cost)
h= $4.20 (unit holding cost) Annual Setup Cost $1,203.74
L= 9 (lead time in days) Annual Holding Cost $1,203.74
WD = 250 (working days/year) Total Variable Cost $2,407.49

Decision
Q= 573.21 (optimal order quantity)
Range Name Cell
AnnualHoldingCost G7
AnnualSetupCost G6
D C4
h C6
K C5
L C7
Q C11
ReorderPoint G4
TotalVariableCost G8
WD C8
 Spreadsheet Implementation of EOQ Model
Annual Demand D 1000
Ordering Cost S $5.00
Holding Cost H $1.25
Lead Time L 5
Item Cost C $12.50

Total annual inventory cost = Ordering cost + Carrying cost

Q (D/Q)*S (Q/2)*H
Order Quantity Ordering Cost Carrying Cost Total Cost
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
170
180
190