Analysis of EOQ Model Based on Factor of Variable Price

Abstract

In traditional EOQ models, material purchase cost per unit is assumed as a constant and purchase cost is fixed. Just holding cost and ordering cost are considered as variable factors of influencing final total cost. In fact, in many industries, the unit price keeps obvious trend of fluctuation. Especially, in electronic field, price of same material or part normally drops much in a year. Therefore, the traditional EOQ model is not applicable to purchasing of this field. This paper resets equation of total cost based on variable price and takes purchase cost and ordering, cost and holding cost as variables into account to updated EOQ model. Thus, the model will be more applicable to the procurement of electronic industry.