Which of the following statements is correct for a firm that currently has total costs of carrying and ordering inventory that are 50% higher than total carrying costs?
A) Current order size is greater than optimal.
B) Current order size is less than optimal.
C) Per unit carrying costs are too high.
D) The optimal order size is currently being used.

Question

Quizplus · Accepted Answer

When total costs of carrying and ordering inventory are higher than total carrying costs, it indicates that the firm is ordering too frequently, leading to higher ordering costs. This suggests that the current order size is greater than the optimal order size, which would balance carrying and ordering costs.

Which of the Following Statements Is Correct for a Firm