Give the formula of EOQ and write down its assumptions.

1.	Give the formula of EOQ and write down its assumptions.
Answer» EOQ = √(2DP/C) where D = the annual usage (or demand) of the item in units P = the cost of place on order C = annual carrying cost per unit The above formula is based on following assumptions: 1. Ordering cost is constant i.e. it is independent of size of the order. 2. The cost of carrying the additional inventory is constant. 3. There are no quantity and discounts available. 4. The consumption is in a steady rate.

Answer»

EOQ = √(2DP/C)

where D = the annual usage (or demand) of the item in units

P = the cost of place on order

C = annual carrying cost per unit

The above formula is based on following assumptions:

1. Ordering cost is constant i.e. it is independent of size of the order.

2. The cost of carrying the additional inventory is constant.

3. There are no quantity and discounts available.

4. The consumption is in a steady rate.

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