In the EOQ model,if our order quantity is greater than the economic order quantity,then ______.
A)the annual holding costs will be the same or lower than the annual ordering costs
B)the annual holding costs will be the same as the annual ordering costs
C)the annual holding costs will be higher than the annual ordering costs
D)the annual holding costs will be lower than the annual ordering costs

Question

Quizplus · Accepted Answer

The economic order quantity (EOQ) is the optimal order quantity that minimizes the total cost of inventory management, which includes both the annual holding costs and the annual ordering costs. If we order in a quantity greater than the EOQ, the annual holding costs will increase as we would be holding more inventory than necessary. On the other hand, the annual ordering costs would decrease since we would be placing fewer orders. However, the increase in holding costs would likely outweigh the decrease in ordering costs, resulting in a higher total cost. Thus, the annual holding costs will be higher than the annual ordering costs if the order quantity is greater than the EOQ.

In the EOQ Model,if Our Order Quantity Is Greater Than