All else equal, a firm that holds safety stocks of inventory will have a lower economic order quantity (EOQ) than a firm that does not.

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is designed to minimize the total holding costs and ordering costs. Holding safety stocks is a strategy to prevent stockouts, but it does not directly affect the EOQ calculation, which is primarily concerned with finding the most cost-effective order size.

All Else Equal, a Firm That Holds Safety Stocks of Inventory