In the basic EOQ model, if the annual demand increases by nine times and all other values remain constant, the EOQ will
A) be difficult to determine without more information
B) increase by three times
C) either increase or decrease
D) decrease by one-third of the previous EOQ

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where D is the demand, S is the setup or ordering cost, and H is the holding cost per unit per year. If the annual demand (D) increases by nine times, the EOQ becomes $\sqrt{\frac{2(9D)S}{H}} = 3\sqrt{\frac{2DS}{H}}$, which means the EOQ increases by three times.

In the Basic EOQ Model, If the Annual Demand Increases