The possibility of a conflict between the order quantity that an EOQ model recommends and the order quantity that the purchasing manager regards as optimal is increased with
A)inventory costs which are computed with the FIFO method.
B)lower priced inventory items.
C)the absence of opportunity costs not being recorded in conventional accounting systems.
D)competitive quotes from suppliers.
E)lower priced costs of goods sold.

Question

Quizplus · Accepted Answer

The EOQ model only takes into account the direct costs associated with holding inventory, such as storage and ordering costs. However, there may be other costs or benefits associated with holding inventory that are not reflected in the model, such as the opportunity cost of tying up funds in inventory or the benefit of having a buffer to avoid stockouts. The purchasing manager may have a different perspective on the optimal order quantity that takes these factors into account. Therefore, the possibility of a conflict between the EOQ model recommendation and the purchasing manager's preference is increased when there are hidden costs or benefits that are not captured in the model or the accounting system.

The Possibility of a Conflict Between the Order Quantity That