EOQ (Economic Order Quantity) -EOQ is the level of inventory order that minimizes the total cost associated with inventory management. The objective is to find out and maintain optimum level of investment in inventory to minimize the total cost associated with it.
The total cost includes:
Carrying Cost: Are associated with the maintenance/holding of inventory.
Ordering Cost: Are costs associated with acquisition of/placing order for inventory.
It is that quantity where the total of ordering cost and holding cost remains lowest.
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