BUISENESS MANAGEMENT
INVENTORY CONTROL
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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2 times
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3 times
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8 times
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4 times
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Detailed explanation-1: -EOQ will increase as the annual demand and the cost of ordering increase and it will decrease as the cost of carrying inventory and the unit cost increase.
Detailed explanation-2: -So as order sizes increase, purchasing costs go down. However, larger orders increase inventory levels. And as inventory increases, carrying costs go up. So the two costs move inversely to one another.
Detailed explanation-3: -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-4: -A) If the ordering cost were to double, the EOQ would rise.