In the basic EOQ model,annual holding cost is one-half of the total annual cost

Question

Quizplus · Accepted Answer

In the basic EOQ model, the total annual cost comprises of two components - annual ordering cost and annual holding cost. The formula for the total annual cost is:

Total Annual Cost = Annual Ordering Cost + Annual Holding Cost

Since holding cost is one of the two components of total annual cost, it cannot be equal to one-half of the total annual cost. Therefore, the statement "annual holding cost is one-half of the total annual cost" is false.

In the Basic EOQ Model,annual Holding Cost Is One-Half of the Total