The optimal order quantity is an amount that minimizes ______.
A)the sum of the total annual ordering costs and the total annual holding costs
B)the total annual holding costs
C)the total annual ordering costs
D)the difference between the total annual ordering costs and the total annual holding costs

Question

Quizplus · Accepted Answer

The optimal order quantity is an amount that minimizes both the total annual ordering costs and the total annual holding costs. These costs are inversely related; as the order quantity increases, total annual ordering costs decrease while total annual holding costs increase. The goal is to find the sweet spot where the sum of these costs is at its minimum.

The Optimal Order Quantity Is an Amount That Minimizes ______