At the optimal order quantity (EOQ),the total annual inventory cost (TC)is given by ______.
A)TC = (Annual demand/EOQ)× Ordering cost per order/2 + (EOQ)× Holding cost per unit per year
B)TC = (Annual demand/EOQ)× Ordering cost per order + (EOQ/2)× Holding cost per unit per year
C)TC = (Annual demand/EOQ)× Ordering cost per order/2 + (EOQ/2)× Holding cost per unit per year
D)TC = (Annual Demand/EOQ)× Ordering cost per order + (EOQ)× Holding cost per unit per year

Question

Quizplus · Accepted Answer

The total annual inventory cost at the optimal order quantity (EOQ) is the sum of the ordering costs and holding costs. The formula for this is TC = (Annual demand/EOQ)× Ordering cost per order + (EOQ/2)× Holding cost per unit per year, which correctly balances the costs of ordering and holding inventory.

At the Optimal Order Quantity (EOQ),the Total Annual Inventory Cost