In the basic EOQ model, if annual demand doubles, the effect on the EOQ is
A)It doubles.
B)It is four times its previous amount.
C)It is half its previous amount.
D)It is about 70 percent of its previous amount.
E)It increases by about 40 percent.

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where $D$ is the demand rate, $S$ is the setup or ordering cost, and $H$ is the holding cost per unit per time period. If the annual demand ($D$) doubles, the EOQ increases by a factor of $\sqrt{2}$, which is approximately 1.41 or 41%, indicating an increase of about 40 percent.

In the Basic EOQ Model, If Annual Demand Doubles, the Effect