A company operating under an EOQ policy enjoys rising annual demand for their products for three consecutive years. During this time their holding cost and ordering cost remain constant. Which statement is best?
A) Their order quantity will fall and so will the time between orders.
B) Their order quantity will fall but the time between orders will rise.
C) Their order quantity will rise but the time between orders will fall.
D) Their order quantity will rise and so will the time between orders.

Question

Quizplus · Accepted Answer

As the annual demand is rising for three consecutive years, it is likely that the company's order quantity will also increase to meet the demand. However, as the holding cost and ordering cost remain constant, the EOQ formula (which balances these costs) will lead to a shorter time between orders in order to keep up with the rising demand. Therefore, the order quantity will rise but the time between orders will fall.

A Company Operating Under an EOQ Policy Enjoys Rising Annual