Economic Order Quantity

Economic Order Quantity
Student’s Name
Institutional Affiliation

Economic Order Quantity
EOQ=2×Q*×CoChWhere;
EOQ= Quantity
Q*= Annual Demand
Co= Ordering Costs
Ch= Holding Costs
In example 2-2
Q*= 50, 000 units
Co= $ 20
Ch= $ 0. 25
Therefore;
EOQ=2×50, 000×200. 25EOQ=√8, 000, 000
EOQ= 2, 828 Units
Total Annual Cots
TC= Ordering Cost (Co) + Holding Cots (Ch)
Ordering Cost (Co)
Total Orders = 50, 0002, 828=18 OrdersCo= $20×18=$360Holding Cots (Ch)
Annual Inventory= 0+28282 = 1414 Units
Ch= 1414×0.25 = $353.5
Thus;
TC= $360 + $353.5
= $713.5

Reference
Choi, T.-M. (2014). Handbook of EOQ inventory problems: Stochastic and deterministic models and applications. New York: Springer.