ENTREPRENEURIAL OPERATIONS
INVENTORY MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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EOQ determine the order size when
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Total cost is minimum
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Total number of order is least
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Total inventory cost are minimum
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None of above
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Explanation:
Detailed explanation-1: -Also referred to as ‘optimum lot size, ‘ the economic order quantity, or EOQ, is a calculation designed to find the optimal order quantity for businesses to minimize logistics costs, warehousing space, stockouts, and overstock costs. The formula is: EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.
Detailed explanation-2: -The economic order quantity (EOQ) refers to the ideal order quantity a company should purchase in order to minimize its inventory costs. A company’s inventory costs may include holding costs, shortage costs, and order costs.
Detailed explanation-3: -The Economic order Quantity Model attempts to determine the orders size that will minimize the total inventory cost.
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