You have taken a job in industry and are facing your first ordering decision. As you prepare to place the order, you remember your instructor teaching you that you would not use the EOQ formula if:
A) you followed a make-to-stock strategy for an item with stable demand.
B) your carrying costs and ordering costs are known and relatively stable.
C) the order size is constrained by capacity limitations such as the number or size of the delivery trucks.
D) your setup costs and holding costs remain constant and can be determined.

Question

Quizplus · Accepted Answer

The EOQ formula assumes that the ordering quantity is not constrained by any outside factors such as capacity limitations. Therefore, if the order size is constrained by capacity limitations, the EOQ formula cannot be used. The other options listed do not exclude the use of the EOQ formula.

You Have Taken a Job in Industry and Are Facing