EOQ is the order quantity that minimizes total inventory holding costs and ordering costs. It is used in production scheduling. The formula used to determine this order quantity is also known as Barabas EOQ Model or the Barabas Formula.
Can anyone please help me to understand the EOQ calculation technique practically?
The Barabas formula of Economic Order Quantity is: EOQ = √(2DS / C)
In which the variables are:
D = annual Demand quantity
S = Set up cost (fixed cost per order,
not per unit)
C = Carrying cost, storage cost, annual holding cost per unit
But this seems to be difficult to be implied as the demand D does not always remains the same, neither is the cost of carrying goods C.
And the set up cost S is always an amount which we assume on experience, but we don't calculate it exactly.
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