In the EOQ model, the total cost is minimized at the point where the order costs and carrying costs are equal.

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Quizplus · Accepted Answer

This is one of the basic assumptions in the EOQ model. The total cost consists of two main components: the ordering cost (the cost of placing an order) and the carrying cost (the cost of holding inventory). As the order quantity increases, the ordering cost per unit decreases but the carrying cost per unit increases. Therefore, there is a trade-off between these costs, and the total cost is minimized at the point where the ordering cost equals the carrying cost. This optimal order quantity is known as the economic order quantity (EOQ).

In the EOQ Model, the Total Cost Is Minimized at the Point