Start networking and exchanging professional insights

Register now or log in to join your professional community.

Follow

Explain the Principles behind Economic Order Quanitity Formula derivation?

user-image
Question added by Shairaz Naseeb , Senior Accountant , Modern Tobacco Corporation
Date Posted: 2015/02/10
Khurram Shaukat Memon
by Khurram Shaukat Memon , Academic Research Writer , Freelance Academic Research Writer

Principle behind using this technique is to determine level of keeping inventory so that cost of reordering and carrying, to company, is low.

Samir Hassan, CPA
by Samir Hassan, CPA , ACCOUNTING, BANKING, AND FINANCE EXPERT , ABU DHABI JUDICIAL DEPARTMENT

Cost of ordering and cost of keeping inventory are two factors that determine when to order goods and materials and at what quantity. Minimizing the combined costs is the approach that led to the development of Economic Order Quantity Formula. 

Mohammed Shahid Ullah
by Mohammed Shahid Ullah , Executive Director (Finance) , Coal Power Generation Company Bangladesh Limited

Economic Order Quantity Formula is the right quantity for purchase of inventory where cost of the inventory will minimum & lead time will be minimum.

More Questions Like This