Economic Order Quantity Formula

Economic Order Quantity Formula

Economic order quantity formula helps to determine the quantity to be order. This formula can be expressed as under;

EOQ = √2CoD/C_h

Where

D= Demand

C_{0 =} Cost of order

C_h= Cost of Holding

Example

Annual Demand = 50,000

Cost of placing order = 50

Holding Cost per unit= .8

Calculate Economic order Quantity

Solution

EOQ = √2CoD/C_h

= √2(50)(50,000)/.8

= 6,250 units