Economic order quantity means:
A) Ordering small quantities at frequent intervals
B) Ordering large quantities less frequently
C) Outsourcing inventory management
D) To balance inventory ordering costs and holding costs

Question

Quizplus · Accepted Answer

Economic order quantity (EOQ) is a formula used to calculate the optimal order quantity that minimizes total inventory costs. It takes into account both the ordering costs and the holding costs associated with inventory. By calculating the EOQ, a company can determine the quantity of inventory that should be ordered at one time to minimize costs. Therefore, the correct choice is D - to balance inventory ordering costs and holding costs. Ordering small quantities at frequent intervals (A) may increase ordering costs, and ordering large quantities less frequently (B) may increase holding costs. Outsourcing inventory management (C) is not the same as EOQ.

Economic Order Quantity Means