The Economic Order Quantity (EOQ):

The Economic Order Quantity or "EOQ" is the order size that

"minimizes" Total Costs.
Assumptions:
i. Only one product is involved
ii. Annual demand requirements known
iii. Demand is even throughout the year
iv. Lead time does not vary
v. Each order is received in a single delivery
vi. InIinite production capacity
vii. There are no quantity discounts


II, Ddemand per year
Ssetup or Ordering cost
HHolding cost
Then,
Cost Holding Annual
Cost) Setup or der Demand)(or 2(Annual

H
2DS
Q or EOQ
Total cost, TC