MANAGEMENT

Detailed explanation-1: -Also referred to as ‘optimum lot size, ’ the economic order quantity, or EOQ, is a calculation designed to find the optimal order quantity for businesses to minimize logistics costs, warehousing space, stockouts, and overstock costs. The formula is: EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.

Detailed explanation-2: -The economic order quantity (EOQ) is a company’s optimal order quantity that meets demand while minimizing its total costs related to ordering, receiving, and holding inventory. The EOQ formula is best applied in situations where demand, ordering, and holding costs remain constant over time.

Detailed explanation-3: -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-4: -Economic order quantity is the size of the lot to be purchased which is economically viable. This is the number of materials that can be purchased at minimum costs. Generally, economic order quantity is the point at which inventory carrying costs are equal to order costs.