NET PROFIT MARGIN RATIO

Economic Order Quantity: The EOQ is the optimum number of units per order to minimise the total cost. The store should be able to decide the right quantity of the stock to be maintained; items should not be over-stocked as they block the investment while stock-outs should be avoided as they hamper quality of patient care. For this the concept of Economic Order Quantity (EOQ) is employed.

Enter Ordering Cost (In Rs.) *   Enter Annual Quantity Requirement (Total Demand of the Item) (In Units)   Enter Holding Cost (In Rs.) *     Economic Order Quantity

Definitions:

Holding Cost or Inventory carrying cost is the cost of holding the materials in the store and includes Cost of storage space Cost of bins and racks Cost of maintaining required environment for the materials to avoid deterioration Amount of interest payable on the money locked up in the materials Cost of spoilage in stores and in handling Cost of obsolescence of some material due to change in process/ productN et profit is calculated by subtracting a company's total expenses from total revenue, thus showing what the company has earned (or lost) in a given period of time (usually one year).

Ordering cost is the cost of placing orders for the purchase of materials and includes Cost of staff posted in the purchasing department, inspection section and payment department Cost of stationary, postage, electricity, telephone etc. Thus this type of cost includes cost of floating tenders, cost of comparative evaluation of quotations, cost of paper work and postage involved in placing the order, cost of inspection and cost of accounting and making payment. In other words the cost varies with the number of orders.