Economic Order Quantity EOQ
📦 Economic Order Quantity (EOQ) – Inventory Management & Accounting Lesson 📊
Learn about Economic Order Quantity (EOQ), a key concept in inventory management that helps businesses minimize total inventory costs by determining the optimal order size. This lesson explains the concept, formula, and practical applications for accountants, managers, and supply chain professionals.
💡 Key Topics Covered:
Definition:
EOQ is the optimal quantity of stock to order that minimizes the sum of ordering costs and holding costs over a given period.
Importance:
Reduces total inventory costs
Helps maintain adequate stock without overstocking
Supports efficient cash flow and resource management
EOQ Formula:
𝐸
𝑂
𝑄
=
2
𝐷
𝑆
𝐻
EOQ=
H
2DS
Where:
𝐷
D = Annual demand (units)
𝑆
S = Ordering cost per order
𝐻
H = Holding cost per unit per year
Practical Example:
Annual demand (D) = 1,000 units
Ordering cost (S) = Ksh 500 per order
Holding cost (H) = Ksh 50 per unit per year
𝐸
𝑂
𝑄
=
2
×
1000
×
500
50
=
20000
≈
141.42
units
EOQ=
50
2×1000×500
=
20000
≈141.42 units
Optimal order size = 141 units per order
Helps minimize total inventory costs
Applications:
Manufacturing, retail, and wholesale inventory planning
Procurement and supply chain optimization
Cost control and budgeting
🎯 Who Should Watch:
Accounting, finance, and supply chain students
Inventory managers, procurement officers, and business owners
Learners aiming to understand cost-effective inventory management
📘 Learn With Manifested Publishers:
Structured lessons with examples, exercises, and clear explanations for accounting and inventory management concepts.
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