Highlight the assumptions upon which the Economic Order Quantity may be applied in an organization.

1. Demand for the product is constant and known.
2. Lead time for replenishment is constant and known.
3. The ordering cost is constant.
4. The carrying cost is constant.
5. The purchase price per unit is constant.
6. There are no quantity discounts available.
7. There are no stockouts allowed.
8. The EOQ model assumes that the organization operates in a stable environment without significant changes in demand or supply conditions.

Assumptions of Economic Order Quantity (EOQ)

- Fixed demand rate: Demand for the item is constant and known throughout the planning horizon.
- Zero lead time: There is no delay between placing an order and receiving the goods.
- Fixed ordering cost: The cost of placing an order is constant and does not vary with the size of the order.
- Fixed holding cost: The cost of holding inventory is constant per unit per unit of time and does not vary with the level of inventory.
- No quantity discounts: The unit cost of the item is the same regardless of the order quantity.
- Single item: The EOQ model is applied to a single item in isolation.
- Stable price: The unit cost of the item is stable and does not fluctuate significantly.
- Negligible shipping costs: Shipping costs are considered negligible or included in the ordering cost.
- Perfect forecast: Demand and lead time are accurately forecasted, so safety stock is not required.
- Continuous replenishment: Inventory is replenished continuously, so there are no stockouts.