Costing

In computation of EOQ, if both Monthly Demand and Normal Usage per week is given means, in the formula which should be taken as Annual Requirement.

1. Should we have to take Monthly Demand and Multiply with 12 or

2. Should we have to take Normal Usage per week and Multipy with 52.

Thanks in advance. Pl. reply

Replies (23)

U should take monthly demand of the prod. dept. in consideration, as it is the qty which the factory requires for manufacturing.

But in institue material they worked out with weekly. In Saravana Prasath Material monthly is taken. 

in given sitiuation  it is provide that the monthly demand of material and same time is given actual usage of material weekly ,

so it is depend on sitiuation.

in ur query please take a weekly .

Ya this depends upon the situation, if demand of ur prod dept is clear than take it with demand otherwise on consumption basis

in the truest sense of costing, the EOQ should always be condidered in terms of weeks, especially for items that are regularly used by the company. So in your case, if you have to consider Normal Usage per week.

thanks for clearing my doubt. But can you pl. tell me from which book you took this reply.

"in the truest sense of costing, the EOQ should always be condidered in terms of weeks, especially for items that are regularly used by the company. So in your case, if you have to consider Normal Usage per week."

Normal Usage per week !!

I am a Cost Accountant, so while reading the ICWA Journal i remembered seeing this logic

u should take normal usage per week

Normal Usage per week

thanks every body :)

normal usage

because we have to consider anual consumption

 

if consm. not given that it is assumed that demand is equal to consumption

 

 

Remember, one of the basic underlying assumptions of the EOQ tool is uniformity in consumption of the materials.  Hence, in any situation like the one faced by you, the preferred choice should be the one which provides more uniformity of consumption - in this case weekly in comparison to monthly.

Originally posted by :Pratik Singhi
" Remember, one of the basic underlying assumptions of the EOQ tool is uniformity in consumption of the materials.  Hence, in any situation like the one faced by you, the preferred choice should be the one which provides more uniformity of consumption - in this case weekly in comparison to monthly. "

Thank you very much:))

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