User:Amik9pande
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Economic Ordering Quantity: It is a quantity of a product being ordered in an order for getting minimum variable cost of managing the inventory per year. Derivation-: X =annual consumptions of the product. Y =cost of placing an order. Z =unit cost of an item. Q =ordering quantity in one order. R = interest rate.
V =totat variable cost of managing the inventory per year. V =annual ordering cost + annual cost of carrying the inventory. V =( X×Y)÷Q+(Q×Z×R)÷2. Differentiate
V with respect to Q and equal it to zero.
We get Q=√(2×Y×X)÷(Z×R).