Question

11. In the EOQ model with quantity discounts, with holding cost stated as a percentage of unit purchase price,in order for the EOQ of the lowest curve to be optimum, it must:
(A) have the lowest total cost
(B) be in a feasible range
(C) be to the left of the pricebreak quantity for that price
(D) have the largest quantity compared to other EOQs

Answer 1

Answer:

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Explanation:

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Answer 2

For the EOQ of the lowest curve to be optimum in the quantity discount model, it must be in a feasible range.

Explanation:

• In the quantity discount model, a graph of the total cost curves will differ across the price levels.
• In the basic model of EOQ, the purchasing cost is ignored.
• The relevance of the EOQ model is for determining fixed order quantities.
• In the quantity discount model in order for the EOQ of the lowest curve to be optimum, with carrying cost stated as a percentage of the unit purchase price, it must be in a feasible range.

• Hence, Option B is correct.