EOQ

(Economic Order Quantity) The most economical quantity of a product that should be purchased at one time. The EOQ is based on all associated costs for ordering and maintaining the product.

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Mathematical model that determines the amount of goods to order to meet projected demand while minimizing inventory costs. In the original version of the model, demand is assumed to be known and constant throughout the year. Ordering cost is assumed to be a fixed amount per order, and carrying costs are assumed to be constant per unit. EOQ is computed as

If the carrying cost is expressed as a percentage of average inventory value (say, 12% per year to hold inventory), then the denominator value in the EOQ formula would be 12% times the price of an item. See also Economic Production Run Size.

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