Average inventory in the EOQ model is defined as
A)The order quantity divided by the number of inventory cycles per year
B)Annual usage divided by the number of inventory cycles per year
C)One-half the order quantity
D)One-half the annual usage

Question

Quizplus · Accepted Answer

According to the EOQ model, the average inventory is equal to one-half of the order quantity. This is because the inventory level starts at zero when an order is placed, grows to the maximum inventory level (the order quantity), and then decreases to zero again as the inventory is sold or used. Therefore, on average, the inventory level is equal to one-half of the maximum level (i.e., the order quantity).

Average Inventory in the EOQ Model Is Defined as