The economic order quantity
A)order; stockout
B)stockout; carrying
C)carrying; ordering
D)accounting; carrying

Question

Quizplus · Accepted Answer

The economic order quantity (EOQ) is a model used to calculate the optimal order quantity that minimizes both ordering and carrying costs. Therefore, it involves considerations of both carrying costs (such as storage costs, obsolescence, and spoilage) and ordering costs (such as set-up costs, delivery costs, and administrative costs). The EOQ formula balances the ordering and carrying costs to determine the optimal order quantity. For this reason, the best choice is C, which refers to the relationship between carrying and ordering costs.

The Economic Order Quantity