Economic Order Quantity

Economic order quantity, abbreviated as EOQ, is the ideal order quantity that a company should make for its inventory given a set cost of production.

 

Economic Order Quantity Formula

\(\large{ EOQ =  \frac{ 2 \; D \; CPU }{ HC }  }\)

Where:

\(\large{ EOQ }\) = economic order quantity

\(\large{ D }\) = demand in units (typically on an annual basis)

\(\large{ HC }\) = holding cost (per unit, per year)

\(\large{ CPU }\) = cost per order (per purchase order)