The order size that minimises total inventory cost, with the number of orders, cycle and total cost.
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Inputs
Economic order quantity
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Working
Indicative. EOQ = √(2 × annual demand × ordering cost ÷ holding cost). Number of orders = demand ÷ EOQ; total relevant cost = ordering cost + holding cost (equal at EOQ). The basic model assumes constant demand and no quantity discounts or stock-outs.