After assuming the future demand, every company needs to determine when to place an order for stock and how much to order. This can be calculated by using the _______________formula.
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The formula that can be used is called the economic order quantity.
Explanation:
- Economic Order Quantity aims at ensuring the optimum level of inventory that a business has to carry.
- The formula aims at reducing the total cost of inventory management.
- It helps in reducing the cost of holding the inventory (storage Cost), ordering cost (cost of placing an order) and shortage cost (hidden loss due to non-availability of stock).
- Economic Order Quantity helps in better utilization of stock and working capital.
To learn more about economic order quantity:
Economic order quantity is represented by
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Short note on economic order quantity ppc
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