The order quantity depends upon the cost of the inventory items, the rate and nature of demand (whether constant or fluctuating), the replenishment time, and the inventory carrying costs and ordering costs for the inventory items.

The EOQ can be calculated with the help of a mathematical formula. Following assumptions are implied in the calculation:

Constant or uniform demand- although the EOQ model assumes constant demand, demand may vary from day to day. If demand is not known in advance- the model must be modified through the inclusion of safe stock.

Constant unit price- the EOQ model assumes that the purchase price per unit of material will remain unaltered irrespective of the order offered by the suppliers to include variable costs resulting from quantity discounts, the total costs in the EOQ model could be redefined.

Constant carrying costs- unit carrying costs may very substantially as the size of the inventory rises, perhaps decreasing because of economies of scale or storage efficiency or increasing as storage space runs out and new warehouses have to be rented.

Constant ordering cost- this assumption is generally valid. However any violation in this respect can be accommodated by modifying the EOQ model in a manner similar to the one used for variable unit price.

Instantaneous delivery- if delivery is not instantaneous, which is generally the case; the original EOQ model must be modified through the inclusion of a safe stock.

Independent orders- if multiple orders result in cost saving by reducing paper work and the transportation cost, the original EOQ model must be further modified. While this modification is somewhat complicated, special EOQ models have been developed to deal with it.

These assumptions have been pointed out to illustrate the limitations of the    basic EOQ model and the ways in which it can be easily modified to  compensate for them.