Answer the following questions using the information below:
The Wood Furniture company produces a specialty wood furniture product, and has the following information available concerning its inventory items:
Annual demand is 20,000 packages per year. The purchase price per package is $32.
-The annual relevant total costs are at a minimum when relevant:
A)ordering costs are greater than the relevant carrying costs
B)carrying costs are greater than the relevant ordering costs
C)carrying costs are equal to relevant ordering costs
D)None of these answers is correct.

Question

Answer the following questions using the information below:
The Wood Furniture company produces a specialty wood furniture product, and has the following information available concerning its inventory items:
  Annual demand is 20,000 packages per year. The purchase price per package is $32.
-The annual relevant total costs are at a minimum when relevant:
A)ordering costs are greater than the relevant carrying costs 
B)carrying costs are greater than the relevant ordering costs 
C)carrying costs are equal to relevant ordering costs 
D)None of these answers is correct.

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) model states that total costs are minimized when ordering costs equal carrying costs.

Answer the Following Questions Using the Information Below