ECONOMICS

Detailed explanation-1: -To calculate the economic order quantity, you will need the following variables: demand rate, setup costs, and holding costs. The formula is: EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.

Detailed explanation-2: -Economic order quantity (EOQ) is a calculation companies perform that represents their ideal order size, allowing them to meet demand without overspending. Inventory managers calculate EOQ to minimize holding costs and excess inventory.

Detailed explanation-3: -Economic Order Quantity (EOQ) is that size of order which minimizes total annual costs of carrying and cost of ordering. It is evident from above that the minimum total costs occur at a point where the ordering costs and inventory carrying costs are equal.

Detailed explanation-4: -The order quantity or purchase quantity that minimises the total annual cost of ordering the item plus holding it in store is called the economic order quantity or EOQ.