Alabaster Manufacturing Company increased the size of several inventory order quantities that had previously been determined using the EOQ model. What is the impact on the total amount of annual carrying and ordering costs?
A)no change
B)increase
C)decrease
D)cannot be determined

Question

Quizplus · Accepted Answer

By increasing the size of order quantities, the average inventory level would increase, resulting in an increase in annual carrying costs. Additionally, by ordering less frequently with larger order quantities, the annual ordering costs may decrease slightly. However, the increase in carrying costs would likely outweigh any potential decrease in ordering costs, resulting in a net increase in total annual costs.

Alabaster Manufacturing Company Increased the Size of Several Inventory Order