The other day I noticed the equation for escape velocity in physics (Escape velocity - Wikipedia) is pretty much exactly the same as the equation for economic order quantity in accounting (Economic order quantity - Wikipedia).
It made me wonder, what in the heck does the equation for computing how to escape earth's gravity have to do with how much stuff you should order when you're ordering more inventory? Strange. Especially since the derivations of the formulas are totally different.
But I wasn't able to come up with anything terribly exciting to explain the similarities. In one case you're trying to find the lowest amount of energy to escape the earth without wasting extra energy, and in another case you're trying to find the lowest amount of cost to order what you need without wasting extra cost. So cost is like energy which makes sense. Other variables aren't quite as clear. Quantity ordered is like velocity, demand is like the gravitational constant, and holding costs are like the distance from the center of the gravitational body.
No comments:
Post a Comment