How does the EBQ formular come out? I figured out how the economic order quantity (EOQ) formula comes out. I know it is quite similar with economic batch quantity (EBQ), sometimes termed economic production quantity (EPQ). I just don't understand why they are different. What makes the difference in holding cost part?
In a way EBQ (also known as EPQ) EPQ is an extension of the EOQ model, the difference being


In EPQ the company will produce its own parts
In EOQ parts are produced by another company


Note that if you produce stuff you need to store it somewhere, which comes at a cost. This is explicitly included in the EPQ model via the holding cost variable