In the EPQ model,given that Q is the optimal production quantity,d is the demand rate,p is the production rate,and H is the holding cost per unit per year,the total annual holding cost equation is given by ______.
A)[Q/2 × ((d-p)/p)]
B)[Q × ((p-d)/p)] × H
C)[Q/2 × ((p-d)/p)] × H
D)Q/2 x H

Question

Quizplus · Accepted Answer

The total annual holding cost equation in the EPQ model is given by (Q/2) x (p-d)/p x H. This formula represents the cost of holding inventory for a year at a certain level of production, where Q is the optimal production quantity, d is the demand rate, p is the production rate, and H is the holding cost per unit per year. Option A is incorrect because it contains an extra factor of (d-p)/p, which is not part of the holding cost equation. Option B is incorrect because it includes (p-d)/p instead of (d-p)/p. Option D is incorrect because it only includes the factor of Q/2 x H, without the term (p-d)/p, which is also necessary to calculate the holding cost.

In the EPQ Model,given That Q Is the Optimal Production