An EOQ model finds the quantity that minimizes the sum of these costs compared to ordering a large number of items at one time, and ordering smaller quantities more frequently. Ordering fewer items more frequently reduces holding costs, while increasing order costs.
Transcribed image text: 4 points In the basic EOQ model a monthly demand of 50 units, an ordening cost of $100, and a holding cost of unit per year, the fol ordering cost will be O $2068.90 O $1034 48 O $600 O $300
However, as the size of inventory grows, the cost of holding the inventory rises. EOQ is the exact point that minimizes both these inversely related costs. EOQ Formula. The Economic Order Quantity formula is calculated by minimizing the total cost per order by setting the first order derivative to zero.
If the carrying cost were to increase, the EOQ would fall. d. If annual demand were to double, the number of orders per year would increase.