A product whose EOQ is 400 units experiences a 50% increase in demand. The new EOQ is:
A) unchanged.
B) increased by less than 50%.
C) increased by 50%.
D) increased by more than 50%.
E) cannot be determined

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where D is demand, S is the ordering cost, and H is the holding cost per unit per period. A 50% increase in demand (D) does not result in a 50% increase in EOQ because the relationship is not linear due to the square root; therefore, the EOQ increases by less than 50%.

A Product Whose EOQ Is 400 Units Experiences a 50