Based on the constant demand assumption in the economic order quantity (EOQ) model, the average cycle inventory is:
A) the order quantity divided by the number of inventory cycles per year.
B) the annual demand divided by the number of inventory cycles per year.
C) half of the order quantity.
D) half of the annual usage.

Question

Quizplus · Accepted Answer

The EOQ model assumes that demand is constant throughout the year, so the average inventory level over the cycle would be half of the order quantity. This is because half the order quantity is held on average during the cycle, and the inventory level starts at this level and then gradually decreases to zero as demand is met.

Based on the Constant Demand Assumption in the Economic Order