ECONOMICS

Detailed explanation-1: -The correct answer is c. To minimize the total cost, order costs, and carrying costs over a period of time. EOQ aims to minimize the total cost, order costs, and carry costs of inventory. It allows for the calculation of the exact time frame for carrying inventory to minimize all costs.

Detailed explanation-2: -Its objective is to determine the optimal (i.e., lowest cost) production or purchase order quantity based on the tradeoff between setup and holding costs. The EOQ is based on the total production costs for a single item for a period of time such as one year.

Detailed explanation-3: -Economic Order Quantity (EOQ) is that size of order which minimizes total annual costs of carrying and cost of ordering. It is evident from above that the minimum total costs occur at a point where the ordering costs and inventory carrying costs are equal.

Detailed explanation-4: -The economic order quantity (EOQ) is a company’s optimal order quantity that meets demand while minimizing its total costs related to ordering, receiving, and holding inventory.

Detailed explanation-5: -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.