Economic order quantity
Overview

EOQ applies only when demand for a product is constant over a period of time (such as a year) and each new order is delivered in full when inventory reaches zero. There is a fixed cost for each order placed, regardless of the quantity of items ordered; an order is assumed to contain only one type of inventory item. There is also a cost for each unit held in storage, commonly known as holding cost, sometimes expressed as a percentage of the purchase cost of the item. Although the EOQ formulation is straightforward, factors such as transportation rates and quantity discounts factor into its real-world application.
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