ECONOMIC ORDER QUANTITY PLAN

Formula Involved in EOQ:-


EOQ = √2* Annual Requirement (A) * Cost per Order (O)/ √Carrying cost per unit per annum (C)

Where as 
A -> Demand for raw material 

O-> Cost of Placing an order for purchase

C -> Cost of Carrying any Inventory annual

Ordering Cost :- 


The Cost which are related to Purchase or order of material. It cost to invite quotation,documentation works like preparation of purchase orders, employee cost directly to the procurement of materials,transportation and inspection cost etc.

Carrying Cost:-


The Cost for holding /Carrying of Inventories in Store. It include the cost of fund invested in inventories , cost of storage,insurance cost,obsolescence etc.