If an item is ordered using its economic order quantity, the annual carrying cost should be:
A) slightly less than the annual ordering cost.
B) equal to the annual ordering cost.
C) twice the annual purchase price.
D) the square root of the annual ordering cost.
E) none of the above.

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) model is designed to minimize the total cost of inventory, which includes both ordering and carrying costs. At the EOQ, the annual carrying cost is equal to the annual ordering cost.

If an Item Is Ordered Using Its Economic Order Quantity