Basic EOQ Model
The basic inventory decision model is Economic Order Quantity or called EOQ model. This model is specified via the following equation as:
Whereas:Q is the economic order quantity
C_{n} is the cost of holding inventories per unit per order
C_{o} is the cost of putting and obtains an order
D is the annual demand in units
The net cost of operating the economic order quantity is specified via total ordering cost in additional total holding costs.
TC = ½QCn + ((D/Q) C_{0})
Whereas: Total holding cost = ½QC_{n}
Total ordering cost = (D/Q) C_{0}
The holding costs involve as:
The ordering costs involve as: