The trial and Error method is another method we can use to calculate the EOQ especially when prices are changed.
In the previous post, we talk about what is Economic Order Quantity (EOQ). The trial and Error method is another method we can calculate EOQ. If you didn’t read it, please read it because I explain What is EOQ? What are the terms we consider when we calculate EOQ? How to calculate EOQ? You are willing to understand this Trial and Error Method you should know about the above matters.
Why do we use the Trial and Error method?
In the previous article, we mention when we calculate the EOQ we think all factors (Demand, Price, Cost) are fixed in the period. But practically in the real world, it doesn’t happen that way. Price, demand, Cost Everything is changed. So we use this Trial and Error method when the price change.
Before you calculate EOQ according to the Trial and Error Method You should know about these formulas.
Let’s see how to calculate EOQ according to the Trial & Error method through this example
e.g.: — ABC company monthly material requirement 400 units. Cost of an order 750$. Storage cost per unit 5$. (These are imaginary data). Calculate the EOQ (for the year)?
The easy way to make it, prepare a table.
Monthly material requirement = 400 units
Annual material requirement = 400 x 12 = 4800 units
When we use this method we consider order cost and storage cost. If we decide on the EOQ we get minimum total cost, a number of order units or order cost, and storage cost equivalent number of order units as an EOQ.
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Conclusion
The trial and Error method is another method when we calculate EOQ.
So hope you get some knowledge about what is Trial and error method is and How to use it to calculate the EOQ. Thank everyone who read this article. I hope I give some for your time.
Don’t forget to comment us your idea, questions, and opinion?
