The objective of the basic economic order quantity model is to
A) minimize the total of the holding and ordering costs
B) maximize the order quantity to prevent stock-outs
C) minimize the number of orders placed
D) calculate the reorder point to avoid shortages

Question

Quizplus · Accepted Answer

The basic economic order quantity model aims to find the order quantity that minimizes the total cost of holding inventory and ordering inventory. The model takes into account the cost of holding inventory, which includes storage, handling, and insurance costs, and the cost of placing an order, which includes administrative and processing costs. By minimizing these costs, the model helps to balance the cost of holding too much or too little inventory. Maximizing order quantity or minimizing the number of orders placed are not the primary objectives of this model. calculating the reorder point is a separate step in inventory management.

The Objective of the Basic Economic Order Quantity Model Is