EOQ is the time at which materials should be ordered.

INTRODUCTION TO COST ACCOUNTING

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

A	TRUE
B	FALSE

Explanation:

Detailed explanation-1: -Which of the following statements concerning the basic EOQ model is true? If an actual order quantity is smaller than-the EOQ, the annual holding cost is less than the annual ordering cost. An increase in holding cost will increase the EOQ value.

Detailed explanation-2: -The EOQ model assumes steady demand of a business product and immediate availability of items to be re-stocked. It does not account for seasonal or economic fluctuations.

Detailed explanation-3: -∴ So, stochastic demand is not an underlying assumption of the basic EOQ model.

Detailed explanation-4: -Run size exceeds maximum inventory is not true about the EOQ model. Explanation: EOQ model is also referred to as the production lot size or the non-instantaneous gradual model. In the economic order quantity model, the rate of consumption and replenishment is not the same.

There is 1 question to complete.