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

Oparation research, discuss the significance of paration research

discuss the significance of paration research

Economic situation - ae model, "Describe the current Australian economic si...

"Describe the current Australian economic situation and support your claims with relevant economic indicators and variables.  The RBA has maintained the cash rate of 4.75% for the

Managerical economics, Plot the demand schedule and draw the demand curve f...

Plot the demand schedule and draw the demand curve for the data given for Marijuana in the case above?

Strategy to fight ntb and reorganisation of export councils, Reorganisation...

Reorganisation of Export Councils: India has a large number of exporpromotion councils, commodity boards and other similar agencies, butheir impact on India's foreign trade h

Firms and industry, explain the main criteria for classifying firms into in...

explain the main criteria for classifying firms into industries.which criteria serve the better and why?

Defien hyper - inflation, Q. Defien Hyper - Inflation? Hyper-Inflation:...

Q. Defien Hyper - Inflation? Hyper-Inflation:It's a situation of extremely rapid inflation (reaching 100% per year or more), frequently resulting from a condition of political

What is Critical Temperature?, What is What is Critical Temperature? Why Cr...

What is What is Critical Temperature? Why Critical Temperature is Specified in Equation? Describe critical temperature specification...

Assignment, illustrate graphically the influence of an increase in immigran...

illustrate graphically the influence of an increase in immigrants on the market supply of labour

How do we evaluate the value of money, How do we evaluate the value of mone...

How do we evaluate the value of money? Supply and demand verifies the value of a currency. If demand is high, the value rises, and vice versa. Factors that affect supply and de

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