MANAGEMENT

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 is the ideal order quantity a company should purchase for its inventory. This order quantity is that order quantity which minimizes the total holding cost and ordering cost. Was this answer helpful?

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 economic order quantity model seeks to ensure that the right amount of inventory is ordered per batch. This is so a company does not have to make orders too frequently and there is not an excess of inventory sitting on hand.