The classic EOQ model is the simplest form which incorporates all the assumptions regarding uncertainties.Choose the cost components not included in this classic EOQ model but included in the extension models.
1)Ordering costs
2)Safety stock costs
3)Stock out costs
4)Internal storage costs

Question

Quizplus · Accepted Answer

The classic EOQ model considers only the carrying cost and the purchase cost, and assumes perfect certainty of demand, lead time, and other factors. However, real-world situations involve uncertainties and costs that are not considered in the classic model. The extension models include the cost components of safety stock and stock out, as well as the ordering costs. The internal storage costs are already covered by the carrying cost in the classic EOQ model. Therefore, choice B is the best, as it includes the additional costs of safety stock and stock out, which affect the overall inventory control strategy.

The Classic EOQ Model Is the Simplest Form Which Incorporates