How do you use EOQ to determine when to order items how many and how to order a specific number?

Answer 1

The Economic Order Quantity (EOQ) model helps determine the optimal order quantity that minimizes total inventory costs, including holding and ordering costs. To use EOQ, you first calculate the EOQ using the formula: (EOQ = \sqrt{\frac{2DS}{H}}), where (D) is the annual demand, (S) is the ordering cost per order, and (H) is the holding cost per unit per year. Once you have the EOQ, you can establish reorder points based on lead time and usage rates to determine when to place orders. To order a specific number, simply place an order for the EOQ amount whenever the inventory reaches the reorder point.