Determine the optimal order size, Microeconomics

Assignment Help:

A major component of the costs of many large firms is the cost associated with ordering and holding inventory. If the yearly demand for the good is D and the size of each order placed is  q  then the number of orders  N  in each year is:

N=D/Q

If the cost of placing each order is Co then the cost of placing all N orders is:

OC = CoN

The second component is the carrying or handling cost of an inventory. Under the assumption that the average number of items in stock is q / 2  and with cost of each item set at  p , the value of this average number of items is p (q / 2) . The carrying in this situation is the proportion C of this value:

CC = Cnp (q/2)

The third component of total costs is simply the purchase cost of all the items, or PC = pD.  Assuming that Co, D, Cn and p are constant, what is the optimal order size q?


Related Discussions:- Determine the optimal order size

Problem in measuring depreciation, Economists view depreciation as capital ...

Economists view depreciation as capital consumption for them, there are two distinct ways of charging for depreciation (1) the depreciation of equipment must equal its opportunity

Productivity side of indian industries, Is indian companies running arisk b...

Is indian companies running arisk by not giving attention to cost cutting

Supply, what happen when a supply shift to the right on a graph

what happen when a supply shift to the right on a graph

Statistics, please can you explainn what "down 0.1 percentage point on the ...

please can you explainn what "down 0.1 percentage point on the quarter means"?

Assignment, is south africa''s economic system now more allocative efficien...

is south africa''s economic system now more allocative efficient

Evolutionary model , Normal 0 false false false EN-IN ...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Distribution of income, Q. Distribution of income? Distribution:Distrib...

Q. Distribution of income? Distribution:Distribution of income reflects the process by which real output of services and goods produced by the economy is allocated to different

Point elasticity, Point elasticity: It refers to measurement of elasticity ...

Point elasticity: It refers to measurement of elasticity on a point On a demand curve. Point elasticity helps in measuring elasticity where change in price and quantity is infinite

Objectives of the imf, International Monetary Fund: International Mone...

International Monetary Fund: International Monetary Fund (IMF) is one of the two institutions that were established as a result of the Brettonwoods Conference in 1944, the oth

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd