If annual demand increases by 100%, the average inventory held in a system governed by the EOQ model is:
A)increased 100%.
B)decreased by 100%.
C)decreased by 50%.
D)increased by 40%.

Question

Quizplus · Accepted Answer

According to the EOQ model, average inventory is calculated as Q/2. If demand increases by 100%, the optimal order quantity (Q) will also increase by approximately 40% (square root of 2). Therefore, the average inventory held will also increase by approximately 40%.

If Annual Demand Increases by 100%, the Average Inventory Held