How do you determine EOQ using equation? Illustrate.

The Economic Order Quantity (EOQ) is determined using the following formula:

$$EOQ=\sqrt{\frac{2DS}{H}}$$

Where:

• $D$ = Annual demand (units)
• $S$ = Ordering cost per order
• $H$ = Holding (storage) cost per unit per year

Illustration with Numerical Example

Assume:

• $D=10,000$ units/year
• $S=\$50$ per order
• $H=\$2$ per unit/year

Calculation Steps

1. Substitute values into the EOQ formula: $$EOQ=\sqrt{\frac{2\times 10,000\times 50}{2}}$$
2. Simplify: $$EOQ=\sqrt{\frac{1,000,000}{2}}=\sqrt{500,000}=707.11$$
3. Round to the nearest whole unit: $$\text{EOQ}=\text{707 units}$$