Waterhouse Company decreased the size of inventory order quantities that had previously been determined using the EOQ model.What is the impact on the total amount of annual carrying and ordering costs?
A) increase
B) no change
C) decrease
D) cannot be determined

Question

Quizplus · Accepted Answer

Decreasing the order quantity increases the number of orders per year, raising ordering costs, while reducing inventory levels, thus lowering carrying costs. The total cost will increase because the increase in ordering costs outweighs the decrease in carrying costs.

Waterhouse Company Decreased the Size of Inventory Order Quantities That