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Calculating EOQ Formula for Inventory Management

Learn how to derive the Economic Order Quantity (EOQ) formula step by step. By minimizing total inventory costs, you can find the optimal order quantity. Start by plotting the inventory cost curve and equating carrying costs to ordering costs for maximum efficiency. The EOQ formula is Q* = √(2DCo/Ch).

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Calculating EOQ Formula for Inventory Management

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  1. How do you derive the expression for EOQ? First, you draw the above Then you state that at minimum total inventory cost, carrying cost = ordering cost i.e., D/Q* X Co = Q*/2 X Ch Therefore, Q*= √(2DCo/Ch)

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