The square root in the EOQ model diminishes the effect of estimation errors because it results in the effects of the incorrect numbers becoming smaller.

Question

Quizplus · Accepted Answer

The square root in the EOQ model reduces the impact of estimation errors by reducing the influence of the variability in the demand rate and order cost on the total cost, as these factors are included in the terms under the square root. This means that even if the estimates for these factors are incorrect, the impact on the total cost will be minimized by taking the square root. Therefore, option A is correct.

The Square Root in the EOQ Model Diminishes the Effect