Which of the following is an assumption of the economic-order-quantity decision model?
A)The quantity ordered can vary at each reorder point.
B)Demand ordering costs and carrying costs fluctuate.
C)There will be timely labor costs.
D)No stockouts occur.

Question

Quizplus · Accepted Answer

The economic-order-quantity decision model assumes that there will be no stockouts occur, meaning that the inventory order will be fulfilled without any interruption or delay. This assumption is necessary to calculate the optimal order quantity that balances the tradeoff between ordering costs and carrying costs. A deviation from this assumption would require additional calculations to determine the costs and benefits of stockouts. Thus, D is the best choice.

Which of the Following Is an Assumption of the Economic-Order-Quantity