EOQ stands for:

​Explanation:

Economic Order Quantity-

• How much to buy at a time, or more specifically, for how much inventory to place an order at a time, is one of the crucial decisions that a company must make when managing its inventory.
• The term "Economic Ordering Quantity" applies to this.
• Baumol's cash management model is the foundation of the EOQ model.
• Economic Order Quantity = \(\begin{equation} E O Q=\sqrt{\frac{2 DC_o}{C_h}} \end{equation}\)

Important PointsEOQ determination-

Ordering cost and carrying cost are the two costs that should be used to determine EOQ.

• Economic ordering quantity is set at a level where the sum of the two opposing costs is the lowest. A balance is struck between the two opposing costs.

Ordering Costs (C_o):

• It is the price associated with placing an order to purchase inventory.
• It might occasionally change depending on how many orders are placed and how many things are ordered in each order.

Carrying Costs (C_h):

• It is a cost associated with maintaining inventories within a business;
• examples include interest on investments, obsolescence losses, insurance premiums, rent, and store-keeping expenses.
• Carrying costs and inventory volume have a positive relationship.