Holding cost formula

Economic order quantity is a supply chain management technique used to determine the optimal lot size per order. This is done in order to avoid stockouts and overstocking, thereby balancing inventory costs and opportunity costs.

You can also listen this article:

What is Economic Order Quantity (EOQ)?

Economic order quantity (EOQ, also known as economic buying quantity) is an inventory management method used to determine the optimal quantity of goods to buy at a time.

The goal of EOQ is to minimize inventory costs while ensuring product availability by maintaining balanced inventory levels.

The EOQ model is typically used in make-to-stock environments where a product’s annual demand as well as its ordering and storage costs are constant.

Simply put, if you know how much of a product will be sold at any given time, you can calculate when and how much you should order to avoid inventory shortages and overstocking.

The basic assumptions of EOQ are:

1. Demand is constant
2. Lead time is constant
3. Ordering cost is constan
   how do you calculate holding cost in eoq
   how to calculate eoq without holding cost