If the variables in the EOQ inventory model are defined as: S = total units demanded during the planning period,O = ordering costs per order,C = carrying costs per unit and Q = inventory order size in units,then the average level of inventory which a company should have during the planning period is
A) 2/3 Q.
B) 1/2 Q.
C) SO/C.
D) 1/2 S.

Question

Quizplus · Accepted Answer

The average level of inventory in the EOQ model is 1/2 Q, because the inventory level starts at Q and decreases to 0 before the next order arrives, averaging out to Q/2 over the period.

If the Variables in the EOQ Inventory Model Are Defined