# Anybody know how to work this very very hard question out? (EQO) :) (would be nice)!

• Mar 19th 2013, 05:38 AM
Anybody know how to work this very very hard question out? (EQO) :) (would be nice)!
1) A local supermarket sells beauty bar soaps which are ordered from a manufacturer. Annual Demand for beauty bar soaps is 5000. The supermarket incurs an annual holding cost of 20% of purchase price and incurs a fixed order placement, transportation and receiving costs of £49 each time an order for the soaps is placed, regardless of the order quantity. The price charged by the manufacturer varies according to the following discount pricing; ( my task is to determine the quantity of beauty bar soaps that the supermarket should order each time it makes an order.)
 order quantity unit price 0-999 £5.00 1000-2499 £4.85 2500 and over £4.75
• Mar 19th 2013, 05:58 AM
Shakarri
Re: Anybody know how to work this very very hard question out? (EQO) :) (would be nic
I assume you know that
$\displaystyle Q= \sqrt{\frac{2DS}{H}}$

S= 49
H= 0.2Qu
D=5000

Where u is the unit price

Find Q for each unit price and then find the total annual cost for each EOQ at those unit prices.

If the EOQ for unit price £5 is 1100 it is outside the order range so just choose the quantity to be the nearest limit of the order range (so the EOQ for unit price £5 would be 999)
• Mar 19th 2013, 06:08 AM
Re: Anybody know how to work this very very hard question out? (EQO) :) (would be nic
aww thankyou for replyin hun :)

well it really confuses me im doing a Business and IT degree and I really hate my maths module but theres no way out of them I have to do them!

but I though the formulae was q*= square root of 2KD/ h (dunno how to do the little symbols)

q is order quantity
D is number of units demanded per year
K is setup or ordering costs
h is cost of holding one unit of inventory for one unit of time
p is unit price
• Mar 19th 2013, 06:40 AM
Shakarri
Re: Anybody know how to work this very very hard question out? (EQO) :) (would be nic
Quote:

aww thankyou for replyin hun :)

well it really confuses me im doing a Business and IT degree and I really hate my maths module but theres no way out of them I have to do them!

but I though the formulae was q*= square root of 2KD/ h (dunno how to do the little symbols)

q is order quantity
D is number of units demanded per year
K is setup or ordering costs
h is cost of holding one unit of inventory for one unit of time
p is unit price

The is the correct equation, I just used S instead of K because wikipedia used that. And i used u instead of p.
But I made a mistake, I took H as being the total holding cost, not holding cost per unit. As you say "The supermarket incurs an annual holding cost of 20% of purchase price" The purchase price is Qu, 20% of this is 0.2Qu and this holding cost per unit would be (0.2Qu)/Q= 0.2u

So H= 0.2u
D= 5000
K= 49

Once again, from
$\displaystyle Q= \sqrt{\frac{2DK}{H}}$

$\displaystyle Q= \sqrt{\frac{2\times 5000 \times 49}{0.2u}}$

Find the EOQ for each value of u and then find out which has the lowest total cost.
Total annual cost is given by
$\displaystyle Cost_{total}= 5000u+49 \frac{5000}{Q}+ 0.2Qu$
• Mar 19th 2013, 06:56 AM