Which one of the following statements regarding the economic order quantity is true?
A)The EOQ model combines several different item orders to the same supplier.
B)If an order quantity is larger than the EOQ,the annual holding cost exceeds the annual ordering cost.
C)The EOQ model assumes a variable demand pattern.
D)When the interest rate drops,both the holding cost and the EOQ decreases.
E)EOQ is used to determine the optimum shipping quantity.

Question

Quizplus · Accepted Answer

The economic order quantity is the order quantity that minimizes the total inventory holding costs and ordering costs. If the order quantity is larger than the EOQ, the annual holding cost will exceed the annual ordering cost, which is not optimal. The other options are incorrect statements about the EOQ.

Which One of the Following Statements Regarding the Economic Order