In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will:
A) increase by about 41%.
B) increase by 100%.
C) increase by 200%.
D) increase, but more data is needed to say by how much.
E) either increase or decrease.

Question

Quizplus · Accepted Answer

The Economic Order Quantity (EOQ) formula is $\sqrt{\frac{2DS}{H}}$, where $D$ is the demand rate, $S$ is the setup or ordering cost, and $H$ is the holding cost per unit per time period. If the cost of placing an order ($S$) doubles, the EOQ will increase by a factor of $\sqrt{2}$, which is approximately 1.41 or an increase of about 41%.

In the Basic EOQ Model, If the Cost of Placing