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

Question

Quizplus · Accepted Answer

The EOQ model is designed to minimize the total cost, which includes both ordering and holding costs. If the order quantity is larger than the EOQ, the holding cost will indeed exceed the ordering cost, as EOQ is the point where these costs are balanced.

Which One of the Following Statements Regarding the Economic Order