MANAGEMENT

Detailed explanation-1: -Economic order quantity (EOQ) is the ideal quantity of units a company should purchase to meet demand while minimizing inventory costs such as holding costs, shortage costs, and order costs.

Detailed explanation-2: -Example of Economic Order Quantity The shop sells 1, 000 shirts each year. It costs the company $5 per year to hold a single shirt in inventory, and the fixed cost to place an order is $2. The EOQ formula is the square root of (2 x 1, 000 shirts x $2 order cost) / ($5 holding cost), or 28.3 with rounding.

Detailed explanation-3: -Optimal order quantity is the most cost-effective amount of inventory that a business should have at any given time. Put simply, this calculation represents your ideal order size to meet demand without tying up too much working capital in excess stock.

Detailed explanation-4: -Economic Order Quantity (EOQ), also known as Economic Buying Quantity (EPQ), is the order quantity that minimizes the total holding costs and ordering costs in inventory management.

Detailed explanation-5: -The Economic Order Quantity is a set point designed to help companies minimize the cost of ordering and holding inventory. The cost of ordering inventory falls with the increase in ordering volume due to purchasing on economies of scale. However, as the size of inventory grows, the cost of holding the inventory rises.