How is EOQ calculated?

EOQ (Economic Order Quantity) is a formula used to calculate the optimal order quantity for a business to minimize inventory costs. The calculation considers various factors such as the annual demand, ordering cost, and carrying cost. To determine the EOQ, the formula takes the square root of twice the annual demand multiplied by the ordering cost divided by the carrying cost per unit. This helps businesses strike a balance between the costs associated with holding inventory (carrying cost) and the costs associated with placing orders (ordering cost), thereby optimizing their inventory management processes and reducing overall expenses.

This mind map was published on 16 January 2024 and has been viewed 49 times.