Course Solutions Uncategorized (Answered) : List three key variables or inputs to the Economic Order Quantity and discuss the basic objective of EOQ?

(Answered) : List three key variables or inputs to the Economic Order Quantity and discuss the basic objective of EOQ?

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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