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# what is EOQ ?

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Dear Friend, **Meaning** Economic order quantity (EOQ) is the order quantity that minimizes the total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Wilson EOQ Model, Wilson Formula or Andler Formula. EOQ applies only when demand for a product is constant over the year and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered. There is also a cost for each unit held in storage, commonly known as holding cost, sometimes expressed as a percentage of the purchase cost of the item.

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**ECONOMIC ORDER QUANTITY** Hi, EOQ is quantity of material which should be ordered or size of order which should be placed so that overall cost is minimum. Overall cost includes carrying cost and ordering cost. As order size increases number of orders to be placed gets reduced. so, annual ordering cost gets lowered. But due to increase in size of order,we have to incur extra carrying cost. So to maintain balance between ordering cost and carrying cost,order size should be such that it would lower the overall cost. Such order size is called EOQ. Thanks

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Hi Uma **ECONOMIC ORDER QUANTITY (EOQ)** Economic order quality (EOQ) is a decision model that calculates the optimal quantity of inventory to order under a given set of assumptions. The economic order quantity may be defined as that level of inventory order that minimizes the total cost associated with inventory management.EOQ refers to the level of inventory at which the total cost of inventory comprising acquisition/ ordering/set up costs and carrying costs is the minimum. There are only ordering and carrying costs. The same quantity is ordered at each reorder point. Demand, purchase-order lead time, ordering costs, and carrying costs are known with certainty. Purchasing costs per unit are unaffected by the quantity ordered. No stockouts occur. EOQ ignores purchasing costs, stockout costs, and quality costs. > EOQ Formula D = Demand in units for specified period P = Relevant ordering costs per purchase order C = Relevant carrying costs of one unit in stock for the time period used for D 3       0 Report

Hii Uma Economic order quantity (EOQ) is the order quantity that minimizes the total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Wilson EOQ Model, Wilson Formula or Andler Formula. EOQ is the acronym for economic order quantity. The economic order quantity is the optimum quantity of goods to be purchased at one time in order to minimize the annual total costs of ordering and carrying or holding items in inventory. EOQ is also referred to as the optimum lot size. The formula to calculate the economic order quantity is the square root of [(2 times the annual demand in units times the incremental cost to process an order) divided by (the incremental annual cost per unit to carry an item in inventory)].

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Hiiiii friend.... EOQ- Economic Order Quantity ---------------------------- **EOQ** is the acronym for economic order quantity. The economic order quantity is the optimum quantity of goods to be purchased at one time in order to minimize the annual total costs of ordering and carrying or holding items in inventory. **EOQ is also referred to as the optimum lot size.** See below image for EOQ formula: A = Demand for the year Cp = Cost to place a single order Ch = Cost to hold one unit inventory for a year **Regards,**

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