Why is the Economic Order Quantity (EOQ) Not Calculated for Actual Costed Items?
Last updated on AUGUST 12, 2016
Applies to:PeopleSoft Enterprise SCM Inventory - Version 8 SP1 and later
Information in this document applies to any platform.
PeopleBooks notes that Economic Order Quantity (EOQ) calculation is based on 'u', amongst other variables, and u = the Item's Standard or Average Cost depending on the Item Cost Method.
What about the Actual Costed Items? Why can't the EOQ be calculated for these Items?
EOQ (Economic Order Quantity): Select to calculate economic order quantities for your Business Unit. The 'Replenishment Parameters' process calculates the EOQ by using the industry standard calculation, as follows:
EOQ = SQRT ( (2 * d * c) / (i * u) )
d = last calculated annual demand for an Item,
c = order preparation cost of EOQ defined on the 'Setup Replenishment' page,
i = annual inventory carrying cost percentage defined on the 'Setup Replenishment' page, and
u = the Item's Standard or Average Cost, depending on the Item's Cost Method.
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