The Allianz Company produces a specialty wood furniture product,and has the following information available concerning its inventory items:

Annual demand is 30,000 packages per year.The purchase price per package is $53.
Which of the following statements is true of Allianz's EOQ system costs?

Question

The Allianz Company produces a specialty wood furniture product,and has the following information available concerning its inventory items:

Annual demand is 30,000 packages per year.The purchase price per package is $53.
Which of the following statements is true of Allianz's EOQ system costs?

Quizplus · Accepted Answer

At the Economic Order Quantity (EOQ), the annual relevant carrying costs are equal to half of the annual relevant total costs. This is because at the EOQ point, the ordering costs and carrying costs are balanced, so the total cost is minimized, and half of this total cost is attributed to carrying costs. Therefore, statement C is true, and statements A, B, and D are false.

The Allianz Company Produces a Specialty Wood Furniture Product,and Has