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What is the objective of the economic order quantity (EOQ) model?

What is the objective of the economic order quantity (EOQ) model?

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Economic Order Quantity refers to the number of units that a company should place order for each time so that the total cost of the inventory shall be maintained at the minimul level. The total cost of inventory shall include the ordering cost, holding costs/carrying costs, buying costs,stock out costs etc. EOQ shall be such number of units which shall be ordered every time so that these costs are kept at minimum level thereby the total cost of inventory shall be the least possible.

It shall be calculated using the formulae: (2AB)/C whole root where A is the annual demand and B is the buying cost and C resembles the carrying cost.

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