economic batch quantity

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A refinement of the economic order quantity to take into account circumstances in which the goods are produced in batches. The formula is:Q = [2cdr/h(rd)]½,

Q = [2cdr/h(rd)]½,

where Q is the quantity to be purchased or manufactured, c is the cost of processing an order for delivery, d is the demand in the period for that stock item, h is the cost of holding a unit of stock, and r is the rate of production.

Subjects: Accounting.

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