Define the economic order quantity (EOQ) model and explain its major assumptions.

The economic order quantity (EOQ) model is a classic economic model that minimizes total cost, which is the sum of the inventory-holding cost and the ordering cost. Several key assumptions underlie the development of this quantitative model.
 Only a single item (SKU) is considered.
 The entire order quantity (Q) arrives in the inventory at one time.
 Only two types of costs are relevant?order/setup and inventory-holding costs.
 No stockouts are allowed.
 The demand for the item is deterministic and continuous over time.
 Lead time is constant.

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