Abstract: In the conventional production-inventory management approach, the production order quantity is determined by referring to costs such as the ordering cost and inventory cost. However, the quality level being produced may change during the production process owing to process deterioration.

How do you calculate production order quantity?

The formula you need to calculate optimal order quantity is: [2 * (Annual Usage in Units * Setup Cost) / Annual Carrying Cost per Unit]^(1/2).

What is the meaning of quantity order?

The order quantity is the quantity of goods that company is ordering from its supplier.