What is the objective of the economic order quantity (EOQ)model for inventory?
A)To minimize order costs or carrying costs,whichever are higher
B)To minimize order costs or carrying costs and maximize the rate of inventory turnover
C)To minimize the total order costs and carrying costs over a period of time
D)To order sufficient quantity to economically meet the next period's demand

Question

Quizplus · Accepted Answer

The objective of the economic order quantity (EOQ) model for inventory is to minimize the total order costs and carrying costs over a period of time. This means finding the optimal order quantity that minimizes the costs associated with ordering and storing inventory. The EOQ formula takes into account the cost of placing an order, the cost of holding inventory, and the expected demand for the inventory. The goal is to find the sweet spot, where too many orders will lead to high ordering costs, while too few orders will lead to high carrying costs. By minimizing both, the total cost of inventory can be minimized. Therefore, option C is the correct choice.

What Is the Objective of the Economic Order Quantity (EOQ)model