Frequently Asked Questions
How is EOQ calculated?
Determine the demand in units
Determine the order cost (incremental cost to process and order)
Determine the holding cost (incremental cost to hold one unit in inventory)
Multiply the demand by 2, then multiply the result by the order cost.
Divide the result by the holding cost.
Calculate the square root of the result to obtain EOQ.
In short: EOQ = square root of (2 x D x S/H) or √ (2DS / H)
What is minimum order quantity?
A minimum order quantity is the fewest number of units required to be purchased at one time