Question

If the order quantity (size of order) is increased

Option 1:
Holding cost decrease and ordering cost increase

Option 2:
Holding cost increase and ordering cost decrease

Option 3:
The total cost increase and then decrease

Option 4:
Storage cost as well as stock-out cost increase​

Answer 1

Answer:

Option 1: Holding cost decreases and ordering cost increases

Explanation:

Answer 2

Answer:

If the order quantity (size of order) is increased Option 1: Holding cost decreases, and the ordering cost increases.

Explanation:

• The economic order quantity (EOQ) guides the ideal order quantity a company should purchase to minimize its inventory costs.
• A company's inventory costs may contain holding costs, shortage costs, and order costs.
• The economic order quantity model strives to assure that the right amount of inventory is ordered per batch.
• This is so a company does not have to create orders too frequently and there is not an excess of inventory sitting on hand.
• EOQ is necessarily utilized in inventory management, which stands for the oversight of the ordering, storing, and benefit of a company's inventory.

Holding costs exist as costs associated with storing unsold inventory. A firm's holding costs contain storage space, labor, and insurance, as well as the price of destroyed or spoiled goods. Minimizing inventory costs exists as an important supply-chain management strategy.

Ordering costs exist as the payments the company incurs to purchase and receive the products it stocks in its inventory. These ordering costs can contain shipping fees, unexpected transportation costs, inspection fees, and other expenditures required to acquire inventory products.

If the order quantity (size of order) is increased Holding cost decreases and the ordering cost increases.

Hence, If the order quantity (size of order) is increased Option 1: Holding cost decreases, and the ordering cost increases.

Option (1) is correct.

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