If an item is ordered at its economic order quantity,the annual carrying cost should be:
A)slightly less than the annual ordering cost.
B)equal to the annual ordering cost.
C)twice the annual purchase price.
D)the square root of the annual ordering cost.
E)cannot be determined because there is insufficient information provided.

Question

Quizplus · Accepted Answer

When an item is ordered at its economic order quantity, the annual carrying cost should be equal to the annual ordering cost. This is because the economic order quantity is calculated to find the point where the costs of ordering and carrying inventory are at their lowest. Therefore, the annual carrying cost and the annual ordering cost should be balanced at the economic order quantity.

If an Item Is Ordered at Its Economic Order Quantity,the