List three key variables or inputs to the Economic Order Quantity and discuss the basic objective of EOQ?
Expert Answer
Economic order quantity is a technique of inventory management which is used to determine the optimal quantity of inventory a company should buy in order to reduce its total cost of inventory.
EOQ = √2AO÷c
So The key variables are
1) A= annual demand quantity
It means the total inventory required by a company to meet up its demand during the year
2) O = ordering cost per order
This cost is also known as set up cost. It means the total cost company pays
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