Economic Order Quantity
　　1．The economic order quantity(EOQ) is the order quantity which minimizes inventory costs.The EOQ can be calculated using a table,graph or formula.
　　2．Economic order theory assumes that the average inventory held is equal to one half of the reorder quantity.
　　3．Example:
　　Suppose a company purchases raw material at a cost of $16 per unit.The annual demand for the raw material is 25,000 units,The holding cost per unit is $6.40 and the cost of placing an order is $32.
　　We can tabulate the annual relevant costs for various order quantities as follows.
　　Notes
　　(1)Average inventory＝Order quantity÷2(ie assuming no safety inventory)
　　(2)Number of orders＝annual demand÷order quantity
　　(3)Annual holding cost＝Average inventory×$6.40
　　(4)Annual order cost＝Number of orders×$32
　　You will see that the economic order quantity is 500 units,At this point the total annual relevant costs are at a minimum.