According to the economic order quantity model,if the holding costs are high,then ______.
A)our order quantities will be smaller to keep our annual holding costs low
B)our order quantities will be higher to keep our annual holding costs low
C)this is an indication that the quantity held in inventory is too high
D)this is an indication of poor inventory management

Question

Quizplus · Accepted Answer

According to the economic order quantity model, holding costs are directly related to the quantity held in inventory. Therefore, if holding costs are high, we should try to reduce the amount of inventory we hold in order to lower our annual holding costs. This means that our order quantities will be smaller, as we will be placing more frequent orders for smaller amounts of inventory.

According to the Economic Order Quantity Model,if the Holding Costs