EOQ Model Minimizing Costs How Much to Order? EOQ with Assumption 1: Holding cost is expressed per unit Let = annual demand D = setup cost per order S = holding cost per unit per year H = number of units per order Q (decision variable) = optimal order quantity Q* Number of orders per year: Average inventory: Total Cost = annual setup cost + annual holding cost
EOQ Model Minimizing Costs How Much to Order? EOQ with Assumption 1: Holding cost is expressed per unit Let D = annual demand S = setup cost per order H = holding cost per unit per year Q = number of units per order (decision variable) Q* = optimal order quantity Number of orders per year: Average inventory: Total Cost = annual setup cost + annual holding cost