Economic Order Quantity Example

Economic Order Quantity Example

Economic order quantity concept can be explained with following example

EOQ = √2CoD/C_h

Where

D= Demand

C_{0 =} Cost of order

C_h= Cost of Holding

Example

Material Annual Demand is = 150,000

Per order Cost = 100

Holding Cost per unit= 1.2

Calculate unit to be ordered by the entity?

Solution

EOQ = √2CoD/C_h

= √2(100)(150,000)/1.2

= 5000 units