Forum Replies Created

  • RWani

    Member
    July 8, 2025 at 4:37 pm in reply to: Week 1 July 2025 Assignment

    1) Assumptions of EOQ:

    – Constant unit price i.e., there is no quantity discounts.

    – There is no stockout or back ordering

    – Single product is being purchased

    – At equilibrium point ordering costs are constant and known

    – At equilibrium point demand is constant and known

    – At equilibrium point holding costs are constant and known

    1 (a) Explain 3 reasons why firms hold inventory:

    – To ensure products are available when customers need them. This avoids stockouts and/or lost sales.

    – To Manage supply chain uncertainty: holding inventory cushions against delays in supply, production issues, or transportation disruptions.

    Buying purchases reduces unit costs by taking advantage of quantity discount thus firms hold inventory to capitalize on quantity discounts.

    1 (b)