The optimal order quantity as determined by the EOQ occurs when ________.
A)ordering costs equal carrying costs
B)ordering costs are exactly 1/2 of carrying costs
C)ordering costs are exactly twice as much as carrying costs
D)None of the answers provided is accurate.

Question

Quizplus · Accepted Answer

The EOQ formula is based on the trade-off between ordering costs and carrying costs. At the optimal order quantity, the ordering cost per order and the carrying cost per unit will be equal. This minimizes the total cost of inventory management. Therefore, choice A is the correct answer. Choices B and C suggest specific ratios between ordering costs and carrying costs, which may not be optimal in all situations. Choice D is incorrect because the EOQ is a well-established inventory management tool.

The Optimal Order Quantity as Determined by the EOQ Occurs