If order quantity is increased, annual holding cost ________, annual order cost ________, and change in annual total cost ________.
A) decreases, increases, is positive
B) decreases, increases, cannot be determined
C) increases, decreases, is negative
D) increases, decreases, cannot be determined

Question

Quizplus · Accepted Answer

According to the economic order quantity model, as the order quantity increases, the annual holding cost increases and the annual order cost decreases. However, the change in annual total cost cannot be determined as it depends on the extent of increase in holding and order costs, and the cost savings from reduced ordering.

If Order Quantity Is Increased, Annual Holding Cost ________, Annual