(12C) Economic Ordering Quantity

11102019, 05:54 PM
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(12C) Economic Ordering Quantity
Blog Entry: http://edspi31415.blogspot.com/2019/11/h...ntity.html
Introduction In inventory control, a business may try to determine the optimum level of inventory, which is known as the economic ordering quantity. There are several ways to calculate the economic ordering quantity, each with various approaches of what variables and factors to use. This blog entry will explore two approaches, as described by the HP Step by Step Solutions For Your HP Calculator book for marketing and sales. (see source) Economic Ordering Quantity Knowing Costs and Sales A simple approach to determining economic ordering quantity is by use of the following formula: EOQ = √(2 * CPO * SALES / ( UNIT_COST * HOLD%) ) where: EOQ = economic ordering quantity CPO = the cost of place an order SALES = the company's annual sales UNIT_COST = cost per unit of inventory HOLD% = holding cost as a rate of inventory costs HP 12C Program: Code: Step; Key Code; Key Store the following values: R1 = CPO R2 = SALES R3 = HOLD% R4 = UNIT_COST Press R/S to calculate EOQ, which is stored in R0. Example: R1 = CPO = $35.00 R2 = SALES = 10,000 units R3 = HOLD% = 20% of inventory value R4 = UNIT_COST = $4.73 cost per inventory unit Result: CPO = 860.21 Economic Ordering Quantity Factoring Discounts and Taxes This next calculation adds discounts rates, units used, and income taxes. EOQ = √(( 2 * (1  TAX%) * CPO * UNITS_USED) / ( (1  TAX%) * HOLD% * UNIT_COST + DISCOUNT% * UNIT_COST)) where: EOQ = economic ordering quantity TAX% = income tax rate CPO = the cost of place an order UNITS_USED = inventory units used in a year UNIT_COST = cost per unit of inventory HOLD% = holding cost as a rate of inventory costs DISCOUNT% = discount rate HP 12C Program: Code: Step; Key Code; Key Instructions: Store the following values: R1 = TAX% = income tax* R2 = CPO R3 = UNITS_USED R4 = HOLD% R5 = UNIT_COST R6 = DISCOUNT% R1 gets recalculated as (1  TAX%) Press R/S to calculate EOQ, which is stored in R0. Example: R1 = TAX% = 22% R2 = $150.00 R3 = 24,000 units R4 = 5.1% holding cost R5 = $8.00 per unit R6 = 2% discount Results: CPO = 3,426.81 Source: "HP Step By Step Solutions For Your HP Calculator: Marketing and Sales: HP17B, HP19B, HP27S" Hewlett Packard. January 1988. Edition 1 

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