Ordering cost

Formula:

EOQ =√[(2× annual demand × cost per order)/

carrying cost per unit) ]

EOQ=√(2× 10,000 x
1,000)/$20)
EOQ= √(1,000,0000
EOQ= 1,000 units per
order
 Inventory holding cost
Formula:
Carrying cost (%)= (inventory holding sum / total
value of inventory ) x 100

( $20,000/$1000,000)×100
 Shortage cost
Formula:

Shortage cost per cycle = P(Q-S) Q-S = P(Q-S²)

2 a 2a
P= shortage cost per unit of time short .
S= inventory level just after a batch of Q units is added to
inventory .
Q-S= shortage in inventory just before a batch Q unit is
added.
Spoilage cost:
Inventory carrying cost:
Carrying cost (%) = Inventory holding sum / Total value of
inventory×100
= 10,000/50,000×100
=0.2×100
=20%