When the economic order quantity (EOQ) model is applied to units produced within the company, ordering costs become
A) setup costs.
B) stockout costs.
C) carrying costs.
D) safety-stock costs.
E) production costs.

Question

Quizplus · Accepted Answer

In the economic order quantity (EOQ) model, ordering costs are considered to be setup costs when applied to units produced within the company. This is because the ordering of materials or components is equivalent to setting up the production process. Therefore, the answer is A.

When the Economic Order Quantity (EOQ) Model Is Applied to Units