The economic order quantity approach states that inventory order sizes should be determined in which of the following manners?
A)computing the amount of the derived demand
B)dividing annual item sales by the carrying cost per item and multiplying by 2
C)dividing the inventory into various groups based on the value per item
D)computing the average number of items sold each month
E)equating restocking costs with carrying costs

Question

Quizplus · Accepted Answer

The economic order quantity approach states that order sizes should be determined by equating restocking costs with carrying costs. This means that the optimal order size will be the one that minimizes the total cost of holding inventory, which includes both the cost of carrying inventory and the cost of ordering and restocking inventory. The formula for calculating this order quantity takes into account the annual demand for the item, the cost of ordering and restocking, and the carrying cost per unit.

The Economic Order Quantity Approach States That Inventory Order Sizes