Inventory management identifies an economic order quantity that
A)minimizes the total costs of ordering and carrying inventory.
B)maximizes the stockout costs.
C)minimizes the costs of ordering.
D)maximizes the cost of carrying inventory.

Question

Quizplus · Accepted Answer

Economic order quantity is the quantity that minimizes the total costs of ordering and carrying inventory. It takes into account both the ordering cost (cost of placing an order) and carrying cost (cost of holding inventory) and determines the most cost-effective way to manage inventory. Maximizing stockout costs or the cost of carrying inventory is not the goal of inventory management. Minimizing the costs of ordering alone may not give the most optimal solution, as it does not factor in the cost of holding inventory.

Inventory Management Identifies an Economic Order Quantity That