Economic Order Quantity

Calculate economic order quantity to minimizes total inventory holding costs and ordering costs. EOQ is useful when demand for a product is constant over the a particular range of tim and when each new order is delivered in full at the point when your inventory reaches zero. There is a fixed cost for each order placed, regardless of the number of units ordered. There is also a cost for each unit held in storage, commonly known as holding cost, sometimes expressed as a percentage of the purchase cost of the item. Use EOQ to determine the optimal number of units to order such that you can minimize the total cost associated with the purchase, delivery and storage of the product.