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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
Cn is the cost of holding inventories per unit per order
Co 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) C0)
Whereas: Total holding cost = ½QCn
Total ordering cost = (D/Q) C0
The holding costs involve as:
The ordering costs involve as:
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