Which of the following is TRUE regarding the EOQ figure below?
A) Curve J represents the annual ordering cost, and curve L represents the annual holding cost.
B) A lot size of G has an annual total cost of about C.
C) At lot size H both holding costs and ordering costs exceed the annual total cost.
D) The EOQ is at lot size G, and curve K is the annual holding cost curve.

Question

Which of the following is TRUE regarding the EOQ figure below? 
A) Curve J represents the annual ordering cost, and curve L represents the annual holding cost. 
B) A lot size of G has an annual total cost of about C. 
C) At lot size H both holding costs and ordering costs exceed the annual total cost. 
D) The EOQ is at lot size G, and curve K is the annual holding cost curve.

Quizplus · Accepted Answer

The EOQ is the lot size at which the total ordering cost and total holding cost are equal. In the given figure, the EOQ is at lot size G. Also, curve K represents the total cost curve, and the minimum point on it is the EOQ point. Curve J represents the annual holding cost, and curve L represents the annual ordering cost, but they are not labeled in the figure. Therefore, option A is not correct. The total cost at the EOQ point is about C, and the lot size H has higher total costs than the EOQ point. Therefore, option B and option C are not correct.

Which of the Following Is TRUE Regarding the EOQ Figure