Economic Order Quantity

natalie

Hiya Everyone

Would anyone be able to help me with how to work out the Economic order Quantity? I have the following information:

7500 litres per year (50 weeks)
2 week delay when ordering stock
cost of order = £20.00
Cost of keeping 1 litre for a year = £1.00
Buffer stock needed of 1 week

thanks a lot

nat :x

Richard

If you have access to the Osborne Costing tutorial book, then page 42 explains it.

The formula they give is 2 x annual usage x ordering cost/stock holding cost, then hit the square root button on your calculator.