Economic Order Quantity|

EOQ=TRN(

SQRT(

(2*AnnSales*OrderCosts

)/

(

(%CarryCosts/100

)*PurchPrice

)

),0

)+ 0*(Min+Max)

! Just to rearrange the variables!

+ 0*(L

(NumOrders,

TRN(

(AnnSales/EOQ

)+ 0.9,0

)*

if(

( Min>EOQ

) OR

( Max<EOQ

),0,1

)

)-NumOrders

)

}

To use the equation, press [F10] and [F9]. Key in 10000 and press [F3]; 20 and press [F4] (OrderCosts) and [F5] (%CarryCosts). As a first approximation, key in 5.00 and press [F6] (PurchPrice); 0 and press [F7] (Min) ; 499 and press [F8] (Max). Now solve for EOQ by pressing (F2). The EOQ = 632.00. HOWEVER, the NumOrders = 0.00, which tells Percy: Don't order at this price. Now, try 4.50 as a PurchPrice and 500 and 999 as the Min and Max. Solve for EOQ = 666.00. Notice that NumOrders = 15.00. Thus Percy should place 15 orders of 666 units each. To be more precise, since 666 15 = 9,990.00, he should place 14 orders of 666 units and one order of 676 units.