Microsoft® Office Excel® 2007: Data Analysis and Business Modeling, Second Edition

Chapter 67. The Economic Order Quantity Inventory Model

• An electronics store sells 10,000 PDAs per year. Each time an order is placed for a supply of PDAs, the store incurs an order cost of $10. The store pays $100 for each PDA, and the cost of holding a PDA in inventory for a year is assumed to be $20. When the store orders PDAs, how large an order should it be?

• A manufacturing plant produces 10,000 computers per year. The cost to produce each computer is $2,000. The cost to set up a production run of computers is $200, and the cost to hold a computer in inventory for a year is $500. The plant can, if it wants, produce 25,000 computers per year. When the plant produces computers, how large a batch should it produce?

When a store orders an item ...