Which one of the following statements concerning the economic order quantity (EOQ)model is TRUE?
A)An increase in holding cost will increase the EOQ.
B)A decrease in demand will increase the EOQ.
C)A decrease in holding cost will increase the EOQ.
D)None of the above is true.

Question

Quizplus · Accepted Answer

The EOQ model takes into account both the ordering cost and holding cost of inventory. Holding cost refers to the cost of holding inventory in storage, including expenses such as rent, insurance, and security. As the holding cost decreases, it becomes less expensive to hold inventory, and the EOQ increases. Therefore, statement C is true. Statements A and B are false. An increase in holding cost would decrease the EOQ because it makes holding inventory more expensive, and a decrease in demand would also decrease the EOQ because less inventory is needed to meet demand.

Which One of the Following Statements Concerning the Economic Order