Which one of the following statements regarding the economic order quantity (EOQ) 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, then the annual holding cost will exceed the annual ordering cost.
C) The EOQ model assumes a variable demand pattern.
D) When the holding cost rate drops, both the annual holding cost and the EOQ decrease.
E) The EOQ is frequently used to determine the optimum shipping quantity.

Question

Quizplus · Accepted Answer

If an order quantity is larger than the EOQ, then the annual holding cost will exceed the annual ordering cost, as EOQ is designed to minimize the total cost, which includes both ordering and holding costs.

Which One of the Following Statements Regarding the Economic Order