MANAGEMENT

Detailed explanation-1: -All carrying costs, as part of the economic order quantity formula, should be variable costs since they change with the amount of inventory you are holding.

Detailed explanation-2: -The total amount of ordering costs that a business incurs will increase with the number of orders placed.

Detailed explanation-3: -Economic Order Quantity is the ideal order quantity a company should purchase for its inventory. This order quantity is that order quantity which minimizes the total holding cost and ordering cost. Was this answer helpful?

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. The EOQ formula is best applied in situations where demand, ordering, and holding costs remain constant over time.

Detailed explanation-5: -Optimal order quantity example Your company pays $4 per unit to hold these candles in inventory, and the order cost comes in at $2 per purchase. In this scenario, the optimal order quantity = the square root of (2 x 1, 000 candles x $2 order cost) / ($4 holding cost). When rounded, you should get an answer of 31.6.