What does the economic order quantity measure?
A)the minimum total annual inventory costs
B)the maximum total annual inventory costs
C)no inventory shortages
D)minimum ordering costs

Question

Quizplus · Accepted Answer

The economic order quantity (EOQ) measures the minimum total annual inventory costs. This is the quantity of inventory that should be ordered at one time to minimize both ordering costs (costs of placing and receiving an order) and holding costs (costs of storing and managing inventory). The EOQ formula takes into account the demand rate, ordering costs, and holding costs to determine the optimal number of units to order. By ordering the EOQ, a company can ensure that inventory shortages are avoided and costs are minimized.

What Does the Economic Order Quantity Measure