EOQ basic model – Graphical method
• In our production we need 5000 kg per
year, ordering cost is 13 EUR per order,
holding costs per kg of salt is 0,1 EUR.
• What is economic quanity per one order
and how many times within a year should
we place our orders for this material?
broj
naručena
prosječna
trošak
trošak
Number
Ordered
Average
Order costs
Holding costs ukupni
Total
of orders količina
quantity
stock
costs
narudžbi
zaliha
naručivanja skladištenja trošak
1
5000
2500
13
250
263
2
2500
1250
26
125
151
3
1667
833
39
83
122
4
1250
625
52
63
115
5
1000
500
65
50
115
6
833
417
78
42
120
7
714
357
91
36
127
8
625
313
104
31
135
9
556
278
117
28
145
10
500
250
130
25
155
Average stock = (start quantity + end quantity) / 2
= (ordered qt + 0) / 2
Cost of order = number of orders within a year * cost per order
Holding costs = average stock * cost of warehousing per unit
Total cost = cost of order + holding cost
1
300
250
200
Economic
order
150
100
trošak naručivanja
trošak skladištenja
Ordering cost
50
Holding cost
0
1
2
3
4
5
6
7
8
9
10
Number of
orders per
year
At the example EOQ is achieved if company orders 4 or 5 times per year, which
means that order quantity will be higher than 1000, and less than 1250 kg of salt per
order.
EOQ – basic model - Equation
EOQ =
2ca
h
c – ordering cost per one order
a – annual quantity
h – holding costs
2
• For our example:
EOQ =
2*13*5000
0,1
EOQ = 1140,17 kg of salt
With ordering period 5000/1140,17 = 4,38
orders within a year
Round up values – your cannot order 4 point
38 times!!! So 4 orders each 1250 kg of salt!
EXCERCISE – ZADATAK 
Company KINDERGARDEN, inc. Produces educative
woden toys. For the little train EDI we need annual
quanities as follows:
a) 15000 of wood pieces
b) 1000 kg glue
c) 1500 kg colour
Calculate optimal order quantity for each material. If
ordering costs are 15 EUR per order. And holding
costs for wood 0,5 EUR/piece, glue 0,65 EUR/kg,
colour 0,9 EUR/kg.
For each product show the graphical solution.
3