In the basic eoq model, an annual demand of 40 units, an ordering cost of $5, and a holding cost of $1/unit per year will result in an eoq of $20.The economic order quantity is a value that a firm can assess to understand how much inventory to order from vendors, manufacturers, or suppliers when determining the number of necessary products they need.
To cut costs, achieve revenue and sales targets, and ensure effectiveness in the ordering and purchasing of inventory, the economic order quantity must be calculated. Applying the ordering cost formula can help you find the economic order quantity. In this post, we will define economic order quantity, define the ordering cost formula, and show you how to use examples to compute economic order quantity using the formula.
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