Abstract
Economic Order Quantity (EOQ) model has been extended. We formulate EOQ model as a calculus of variations. This new extended problem is a simple optimal control problem with an unknown initial state. By solving this problem we generalize EOQ formula [1].
Highlights
Economic Order Quantity (EOQ) model has been extended
The economic order quantity (EOQ) formula plays an important role in inventory management
The EOQ model assumes that demand is constant, and that inventory is depleted at a fixed rate until it reaches zero
Summary
Economic Order Quantity (EOQ) model has been extended. We formulate EOQ model as a calculus of variations. The economic order quantity (EOQ) formula plays an important role in inventory management. The Economic Order Quantity (EOQ) is the number of units that a company should add to inventory with each order to minimize the total costs of inventory—such as holding costs, and shortage costs.
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