(Answered) The Economic Order Quantity model ensures thatThe Economic Order Quantity model ensures that

➤ How is the EOQ formula derived and what are its components?
The EOQ formula Q* = sqrt(2DS/H) is derived by minimizing total annual cost: ordering cost (D/Q × S) plus holding cost (Q/2 × H). D is annual demand, S is cost per order, and H is holding cost per unit per year. The derivation assumes steady demand, fixed lead time, and no quantity discounts.