Recent interest rate increases have increased the cost of carrying the inventory.What will be the effect of this on EOQ, if the sales and order costs remain the same?

Question

Quizplus · Accepted Answer

Since the interest rate increase has increased the cost of carrying inventory, it will lead to a higher cost of holding inventory. This means that it will be more expensive to keep inventory in stock for a longer period of time. As a result, the EOQ will decrease as it will be economically feasible to order less inventory each time.

Recent Interest Rate Increases Have Increased the Cost of Carrying