Microsoft® Excel Data Analysis and Business Modeling

Chapter 65. 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 place?

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

Consider a store that orders an item repeatedly. A natural ...