Basic economic order quantity model , Finance Basics

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Basic economic order quantity (EOQ) model

This model is one of the oldest and most commonly used in inventory control. It is based on a number of assumptions:

The demand for the item is known, constant and independent of the demand for other items
The lead time (time between ordering and receipt) is known and fixed
The receipt of the order occurs in a single instant and not over a period of time
Quantity discounts are not calculated as part of the model
The only costs that may vary within the model are the costs of ordering (or setting up a machine if the item is manufactured) and the storing or holding cost of the item ?
Stock outs or shortages do not occur.

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