In the basic economic order quantity (EOQ) model, at Q* the estimated total annual holding cost:
A)is less than the estimated total annual ordering cost.
B)equals the estimated total annual ordering cost.
C)is greater then the estimated total annual ordering cost.
D)bears no necessary relationship to estimated total annual ordering cost.

Question

Quizplus · Accepted Answer

In the basic EOQ model, the total annual holding cost and total annual ordering cost are equal at Q*. This is because the EOQ model strives to find the quantity at which the sum of these costs is minimized. Therefore, the answer is B.

In the Basic Economic Order Quantity (EOQ) Model, at Q