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04 June 2012 what is the logic of EOQ formula??

Ajay Mishra

Ajay Mishra (Expert)
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04 June 2012 Hi

The economic order-quantity model considers the tradeoff between ordering cost and storage cost in choosing the quantity to use in replenishing item inventories. A larger order-quantity reduces ordering frequency, and, hence ordering cost/ month, but requires holding a larger average inventory, which increases storage (holding) cost/month. On the other hand, a smaller order-quantity reduces average inventory but requires more frequent ordering and higher ordering cost/month. The cost- minimizing order-quantity is called the Economic Order Quantity (EOQ).

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Querist : Anonymous

Querist : Anonymous (Querist)

05 June 2012 how the formula of EOQ is derived?