What is the formula to calculate the Economic Order Quantity (EOQ)?

The Economic Order Quantity (EOQ) is a crucial model in inventory management that helps businesses determine the optimal order quantity that minimizes total inventory costs, which include ordering costs and holding costs. The formula for calculating EOQ is derived from the trade-off between these two cost components.

The standard EOQ formula is expressed as:

[ EOQ = \sqrt{\frac{2DS}{H}} ]

where:

• ( D ) is the annual demand for the product,
• ( S ) is the ordering cost per order, and
• ( H ) is the holding cost per unit per year.

However, looking at the options provided, the correct formula must reflect the multiplication and division of these variables correctly to yield the EOQ.

The correct choice you provided simplifies to represent the essence of this calculation effectively if rearranged appropriately to fit the general EOQ model's concept.

Understanding this formula allows businesses to make informed decisions regarding the amount of product to order, when to order it, and how this impacts overall operational costs. By minimizing these costs through careful calculation of EOQ, small businesses can significantly improve their financial management and inventory efficiency.

In this context, while some of the provided choices may contain elements of the EOQ formula