For the basic EOQ model, which of the following relationships is not true?
A)The optimal number of orders per year equals annual demand divided by the EOQ.
B)The reorder point equals daily demand multiplied by the lead-time in days, excluding safety stock.
C)Average inventory level equals one-half the order size.
D)The average dollar level of inventory equals unit price multiplied by order quantity.

Question

Quizplus · Accepted Answer

The average dollar level of inventory is calculated by taking the average inventory level (which is one-half the EOQ) and multiplying it by the unit price, not the entire order quantity. Choices A, B, and C correctly describe relationships in the basic EOQ model.

For the Basic EOQ Model, Which of the Following Relationships