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The goal of the EOQ formulais to find the optimal number of product units to order. If this target is attained, the costs of acquiring, distributing, and storing units will be decreased. Firms with complicated supply chains and large variable costs produce EOQ using an algorithm in their computer software, and the EOQ formula may be altered to provide various production levels or order intervals.

The EOQ is a useful cash flow tool. The strategy can help a company control the amount of cash tied up in its inventory balance. Inventory is frequently a company's most important asset, second only to human resources, and as a result, organizations must have adequate inventory on hand to meet the expectations of their customers.

Given,

Annual demand (A) = 3000 units

Ordering cost per unit (S) = $40 per order

Holding cost (H) = 25% of cost

$$\begin{gathered} \mathrm{EOQ}=\sqrt{\frac{2×\mathrm{A}×\mathrm{S}}{\mathrm{H}}} \\ \mathrm{where}, \\ \mathrm{A}=\mathrm{Annual}\mathrm{demand} \\ \mathrm{S}=\mathrm{Ordering}\mathrm{cost}\mathrm{per}\mathrm{unit} \\ \mathrm{H}=\mathrm{Carrying}\mathrm{cost}\mathrm{per}\mathrm{unit} \end{gathered}$$

Hence, the 225 units lie within the given range and therefore it is feasible and considered an Optimal order quantity