Application of economic order quantity with quantity discount model. a case study of West African Examination Council

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2014-11-17
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The Economic Order Quantity (EOQ) is a pure economic model in the classical inventory control theory. The model is designed to find the order quantity so as to minimize the total average cost of replenishment under deterministic demand and some simplifying assumptions. The study focuses on inventory management when the unit purchasing cost decreases with the order quantity, Q. The main objective of the study is to model Economic Order Quantity with quantity discount to achieve optimal level of inventory. The model was analyzed against the current practices of the West African Examination Council, (WAEC) ordering policies to find out whether it is appropriate to go for quantity discount when offered. The Management of WAEC wants to determine if it should take advantage of the discount or order basic EOQ order size offered to them by their suppliers. The 2012 data was used for the analysis, (as shown in table 4.1, page 65). From the analysis it was observed that a discount price of GHȼ890 000.00 is the minimum price that gives the minimum quantity of 350 000. There is no order size larger than 350 000 that would results in a lower price. This means that the company should spend a total cost of eight hundred and ninety thousand Ghana cedis, (GHȼ890 000.00) to order an optimal quantity of three hundred and thirty thousand, (350 000) units of materials. The management will benefit from the proposed approach for their inventory control management system; this could help them take informed decision. The study recommends that the model should be adopted by the company for their inventory control and management planning.
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A thesis submitted to the Department of Mathematics, Kwame Nkrumah University of Science and Technology, Kumasi, in partial fulfillment of the requirement for the degree of Master of Science: Industrial Mathematics, 2014
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