Economic Order Quantity

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natalie
natalie Registered Posts: 2 New contributor 🐸
in AAT Level 3 (Level 6 in Scotland)
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

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  • Richard
    Richard Registered Posts: 373 Dedicated contributor 🦉
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    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.

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