COST ACCOUNTING
INVENTORY AND PRODUCTION MANAGEMENT
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]


True


False

Detailed explanation1: c) Except for rounding, annual ordering and carrying costs are ALWAYS equal at the EOQ.
Detailed explanation2: Ordering costs are costs that are incurred to obtain additional inventories, whereas carrying costs are the costs incurred to hold inventory on hand. The total inventory cost is the ordering cost plus the carrying cost.
Detailed explanation3: In the basic EOQ model, at the optimal order quantity annual holding cost is equal to the annual ordering cost. Annual ordering cost is inversely related to order size, as the size of orders decreases the annual cost of ordering increases. Annual ordering cost is a function of order size.
Detailed explanation4: Which of the following statements concerning the basic EOQ model is true? If an actual order quantity is smaller thanthe EOQ, the annual holding cost is less than the annual ordering cost. An increase in holding cost will increase the EOQ value.