Which of the Following Is True of the EOQ Model

question 26

Multiple Choice

Which of the following is true of the EOQ model? Note that the optimal order quantity, Q, will be called EOQ.

• A) If the fixed per order cost increases by 20%, then EOQ will increase by 20%
• B) If the annual sales, in units, increases by 20%, then EOQ will increase by 20%.
• C) If the average inventory increases by 20%, then the total carrying costs will increase by 20%.
• D) If the average inventory increases by 20% the total order costs will increase by 20%.
• E) None of the above is true.

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Definitions:

Production

The process of creating goods and services from various inputs like labor, knowledge, and raw materials.

U-Shape

A graphical representation describing a relationship or phenomenon that decreases, reaches a minimum point, and then increases, resembling the letter "U."

Economies of Scale

Reduction in per unit cost as the volume of production increases, due to factors like bulk purchasing and efficient use of resources.

Technological Change

The overall process of invention, innovation, and diffusion of technology or processes.