Fixed Order Quantity - What is EOQ and its formula?

Q: What is EOQ and its formula?

The EOQ formula is the square root of (2 x 1,000 pairs x $2 order cost) / ($5 holding cost) or 28.3 with rounding. The ideal order size to minimize costs and meet customer demand is slightly more than 28 pairs of jeans. A more complex portion of the EOQ formula provides the reorder point.

Answer

With some rounding, the EOQ formula is 28.3 (two thousand pairs times $2 order cost) divided by $5 holding cost. For optimal cost-effectiveness and customer satisfaction, an order size of little over 28 pairs of jeans is recommended. The reorder point is given by a more complicated part of the EOQ calculation.

Fixed Order Quantity - What is EOQ and its formula?

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