Which of these statements about EOQ is best?
A)Under the assumptions made to develop the EOQ model, average inventory is one-half of the maximum inventory.
B)The EOQ model is very sensitive to minor violations of the basic assumptions.
C)The economic order quantity helps one estimate the cost of holding inventory.
D)An increase in holding cost will increase the economic order quantity, holding all other factors constant.

Question

Quizplus · Accepted Answer

Choice A accurately reflects one of the assumptions made in the development of the EOQ model. The other choices are either inaccurate (B and D) or incomplete (C). While the EOQ model does help estimate holding costs, it also considers ordering costs and is designed to minimize the total cost of inventory. Additionally, while an increase in holding cost may increase the EOQ, it will also increase the total cost of inventory, so the optimal order quantity may not necessarily increase.

Which of These Statements About EOQ Is Best