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EOQ formula
The EOQ equation assumes demand is constant and steady. It also assumes that demand for different items is independent. This is inappropriate for controlling inventories in intermittent systems of assembled products where demand for lower level items is dependent on demand for finished goods. Consider the Ford Motor Company.
Demand for wheels or tyres are very much related to the demand for engines. So for components and raw materials it is wrong to apply the EOQ model.
The concept of opportunity cost occupies a very important place in modern economic analysis. The opportunity cost of any good is the next best alternative goods that are sacrificed
TC = Q3 – 8Q2 + 68Q + 4
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#i need more light about it..
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