Practicing Success

Target Exam

CUET

Subject

Entrepreneurship

Chapter

Business Arithmetic

Question:

Economic Order Quantity (E.O.Q) = ______?

Options:

$\sqrt{\frac{2PD}{C}}$

$\sqrt{\frac{2P}{D}}$

$\sqrt{\frac{PC}{2D}}$

$\sqrt[2]{\frac{PC}{D}}$

Correct Answer:

$\sqrt{\frac{2PD}{C}}$

Explanation:

Formula for calculating EOQ (Q) =\(\sqrt\frac{2PD}{C} \) where
D= Annual Demand for the item (SKU)
P: Cost of placing and receiving one Order (does not include purchase price)
C: Inventory carrying cost per unit. This may be derived by multiplying the unit price of the item by the carrying cost expressed as %age of the unit price.
S: Safety Stock level for the item.