Reorder Quantity
(Economic Order Quantity).
Formula
EOQ = √(2 × Annual Demand × Ordering Cost / Holding Cost per unit)
Real World
A supermarket chain like Tesco calculates its EOQ for tinned goods to balance the cost of placing frequent small orders against the warehouse space and capital tied up in holding large stock volumes.
Exam Focus
In EOQ questions, identify what changes (demand, holding cost) and explain the directional effect on order size — don't just recalculate.
How well did you know this?