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What Is Economic Order Quantity (EOQ)?

What Is Economic Order Quantity (EOQ)?

EOQ refers to the level of inventory at which the total cost of inventory comprising ordering cost and carrying cost. Determining an optimum level involves two types of cost such as ordering cost and carrying cost. The EOQ is that inventory level that minimizes the total of ordering of carrying cost.

finance
[Post Image Courtesy of Adamr at FreeDigitalPhotos.net]

EOQ can be calculated with the help of the mathematical formula:

EOQ = V2ab/c

Where,

a = Annual usage of inventories (units)

b = Buying cost per order

c = Carrying cost per unit

About Author Mohamed Abu 'l-Gharaniq

when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries.

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