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How much firm save annually in carrying cost using eoq A produce distributor uses 800 packing crates a month, which it purchases at a cost of $10 each. The manager has assigned an annual carrying cost of 35 percent of the purchase price per crate. Ordering costs are $28. Currently the manager orders once a month. How much could the firm save annually in ordering and carrying costs by using the EOQ?
Economic order quantity (EOQ) is the order quantity that minimizes the total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Wilson EOQ Model, Wilson Formula or Andler Formula. Purchase cost: This is the variable cost of goods: purchase unit price Ã annual demand quantity. 2  This is P Ã D. 3  Ordering cost: This is the cost of placing orders: each order has a fixed cost K, and we need to order D/Q times per year.