By calculating the total cost for different order quantities, businesses can identify the most cost-effective order quantity that minimizes the total inventory costs.
Fixed Order Quantity calculator helps to calculate total costs for different order quantities.
Total Cost Calculator To Fix Order Quantity
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Quick Guide to Use the Fixed Order Quantity Calculator
- Choose the currency in which you want to view the total cost.
- Input the total annual demand for the product in units.
- Specify the cost per unit of the product.
- Enter the desired order quantity for each order.
- Input the cost associated with placing an order.
- Provide the holding cost per unit per year.
- Press the “Calculate” button to get the total cost.
- Review the total cost displayed, including a breakdown in the selected currency. A bar graph will visualize the total cost for better understanding.
- You can enter different desired order quantities and check the variations in the total cost.
- Based on the total cost for different order quantities, you can fix your order quantity.
- Use the “Reset” button to perform a new calculation
Formula
Total cost = Purchase cost + Ordering cost + Holding cost
- TC = DC + (D/Q) S + (Q/2) H
Total cost = {(Annual demand X unit cost) + [(Annual demand/Order quantity) X Ordering costs] + [(Order quantity/2) X Holding costs]}
Input Field Details
- Currency: Dropdown to select the preferred currency.
- Annual Demand: Total demand for the product in units per year.
- Unit Cost: Cost per unit of the product.
- Order Quantity: Desired quantity for each order.
- Ordering Costs: Cost associated with placing an order, regardless of the order size. This could include administrative expenses, shipping, handling, etc. It contributes to the total cost by adding a fixed expense each time an order is placed.
- Holding Costs: Cost per unit per year for holding inventory.
What is Fixed Order Quantity?
Fixed Order Quantity is the predetermined quantity of a product that a company should order each time it replenishes its inventory.
This quantity is optimized to minimize total inventory costs, balancing ordering costs and holding costs.
Who Can Use This Calculator?
This calculator is useful for businesses and individuals involved in inventory management, supply chain optimization, and procurement.
It is applicable to anyone looking to determine the most cost-effective order quantity for a product.
Industries That Can Use This Calculator
- Retail
- Manufacturing
- Wholesale
- Distribution
- E-commerce
- Supply Chain Management
Benefits of Using This Calculator
- Cost Efficiency: Helps in finding the optimal order quantity to minimize overall costs.
- Inventory Optimization: Reduces excess inventory and holding costs.
- Financial Planning: Assists in budgeting and financial forecasting.
- Improved Decision-Making: Enables better decision-making in procurement and inventory management.
FAQs
How often should I use this calculator?
It’s recommended to use the calculator whenever there are changes in demand, costs, or ordering policies.
Can this calculator handle different currencies?
Yes, the calculator allows you to choose from multiple currencies.
What does the bar graph represent?
The bar graph visually represents the total cost in the selected currency for better analysis.
