The optimal number of units to order or produce is the economic order quantity,which is the optimal trade-off between which of the following?
A)controllable and non-controllable costs.
B)fixed costs and variable costs.
C)setup (or order)costs and carrying costs.
D)sunk and opportunity costs.

Question

Quizplus · Accepted Answer

The economic order quantity is the optimal trade-off between setup (or order) costs and carrying costs. Setup costs refer to the fixed cost of placing an order and carrying costs refer to the variable cost of holding inventory. By finding the economic order quantity, a company can minimize the total cost of ordering and holding inventory. Therefore, option C is the correct answer. Option A (controllable and non-controllable costs) and option B (fixed and variable costs) are not directly related to the economic order quantity. Option D (sunk and opportunity costs) is not relevant to this scenario.

The Optimal Number of Units to Order or Produce Is