Question

6. In the economic order quantity or EOQ model the equation (Q/2) × CH calculates:

(A) The number of orders each year
(B) The total holding costs each year
(C) Total ordering costs each year
(D) Both A and C

Answer 1

Answer:

In the economic order quantity or EOQ model the equation (Q/2) × CH calculates:

(A) The number of orders each year

(B) The total holding costs each year

(C) Total ordering costs each year

(D) Both A and C

Answer 2

Answer:

The correct option for this question is (B) The total holding costs each year.

Explanation:

The EOQ model is what?

Companies determine their ideal order size by performing a calculation known as the economic order quantity (EOQ), which enables them to meet demand without going overboard. For the purpose of reducing holding costs and surplus inventory, inventory managers calculate EOQ. The optimal order quantity to reduce inventory expenses, such as holding costs, shortage costs, and order costs is called an economic order quantity, or EOQ. Ford W. Harris created this production-scheduling concept in 1913, and it has since been improved. Its major objective is to assist a business in keeping an even level of inventory and cutting costs. Order cost, warehouse carrying cost, and variable annual usage amount are used by EOQ.

Thus, according to the EOQ model, inventory is drained until it reaches zero at a predetermined rate and demand remains constant.