The Economic Order Quantity (EOQ) calculation considers the cost to acquire a product. For example:
Clerical/labor cost of processing orders
Cost of inspecting and returning products
Transportation costs
Handling costs
To estimate the acquisition cost of the item, total the costs to acquire an average product, divide by the number of items on a typical purchase order.
The actual acquisition cost varies per item. For the purpose of calculating and using an EOQ, apply the purchasing method used most often for most products within your company.
Set the EOQ acquisition cost using the EOQ $ field in the Forecast Parameters Maintenance dialog box.
See Also:
Economic Order Quantity Overview