A company uses 82000 widgets in production per annum The fix

A company uses 82000 widgets in production per annum. The fixed cost per order is 2018 and the cost PER UNIT of holding a widget in stock is 18 per annum. Calculate the economic order quantity and the total cost of ordering and holding stock per annum.

Solution

EOQ =  ?(2DO / H)

D = demand

O = ordering cost

H = holding cost

EOQ = ?2*82000*2018/18

EOQ = ?18386222

EOQ = 4288 units

Total ordering and carrying cost

Ordering cost = (82000/4288) order*2018

= 19 orders * 2018

   = 38342

Holding cost = {(0+4288)/2}*18

= 38592

Total cost = 38342+38592

   = 76934 per annum