Average inventory in the economic order quantity (EOQ) model is defined as:
A) the order quantity divided by the number of inventory cycles per year.
B) the annual usage divided by the number of inventory cycles per year.
C) one-half of the order quantity.
D) one-half of the annual usage.

Question

Quizplus · Accepted Answer

In the EOQ model, the average inventory is computed as one-half of the order quantity. This is because the inventory level fluctuates between zero (when an order is placed) and the maximum level (when a new order is received) and therefore, the average inventory is half of the maximum inventory level.

Average Inventory in the Economic Order Quantity (EOQ) Model Is