What does the Economic Production Quantity (EPQ) model focus on?

The Economic Production Quantity (EPQ) model is primarily concerned with determining the optimal production quantity that minimizes total production and inventory costs while meeting demand. This model considers the trade-off between setup costs and holding costs, allowing a business to produce in batches that are most efficient for its operational and inventory management needs. By establishing the most cost-effective quantity to produce each time, the EPQ helps companies regulate their production levels, manage their inventory more effectively, and ultimately save money.

In contrast, maximizing sales revenue focuses on increasing income rather than on production and inventory costs. Minimizing setup costs alone does not encompass the entire framework of the EPQ, as it includes holding and production costs as well. Simplifying inventory tracking, while beneficial, is not the central focus of the EPQ model; the model aims to optimize the overall balance of production and inventory costs in relation to demand and manufacturing capabilities.