MANAGEMENT

Detailed explanation-1: -How do you calculate the economic order quantity? 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: -The EOQ formula is as follows. EOQ = Square root of [(2 x demand x ordering cost) / carrying cost] Demand. The demand remains constant according to the assumptions made by EOQ. The demand is how much inventory is used per year or how many units are sold per year.

Detailed explanation-3: -Inventory holding sum = inventory service cost + capital cost + storage space cost + inventory risk. Inventory holding sum = $20, 000. (Inventory holding sum / total value of inventory) x 100 = holding costs (%)

Detailed explanation-4: -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.