Which of the following statements is true of the the economic order quantity decision model?
A) The economic order quantity increases with higher demand and higher carrying costs and decreases with higher ordering costs.
B) The simplest version of the economic order quantity model assumes there are only ordering costs, carrying costs, stockout costs, and purchasing costs.
C) It assumes the purchase order lead time is not known with certainty.
D) The larger the order quantity, the lower the annual relevant ordering costs and the higher the annual relevant carrying costs.

Question

Quizplus · Accepted Answer

The economic order quantity model assumes that the larger the order quantity, the lower the annual relevant ordering costs and the higher the annual relevant carrying costs. This is because larger order quantities result in fewer orders, reducing ordering costs, but increasing carrying costs as more inventory is held. Options A, B, and C are incorrect as they do not describe the main characteristic of the economic order quantity model.

Which of the Following Statements Is True of the The Economic