State the meaning of the economic order quantity (EOQ) model?

The economic order quantity (EOQ) model is a formula used to determine the optimal quantity of inventory to order in order to minimize total inventory costs, including holding costs and ordering costs. The model takes into account factors such as demand rate, ordering costs, and holding costs to calculate the most cost-effective order quantity.

The economic order quantity (EOQ) model is a mathematical formula that determines the optimal order quantity for a given set of variables, such as demand, holding costs, and ordering costs. The purpose of the EOQ model is to minimize the total inventory costs, which include the costs of ordering, holding, and shortage.

The EOQ model is given by the following formula:

```
EOQ = √(2-D-O)/H
```

where:

- D = annual demand in units
- O = ordering cost per order
- H = holding cost per unit per year

The EOQ model is a simple but effective tool for determining the optimal order quantity. It can help businesses to reduce their inventory costs by ordering the right amount of inventory at the right time.