Which of the Following Is True of the EOQ Model

question 23

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 annual sales, in units, increases by 20%, then EOQ will increase by 20%.
• B) If the average inventory increases by 20%, then the total carrying costs will increase by 20%.
• C) If the average inventory increases by 20% the total order costs will increase by 20%.
• D) The EOC is the same for all companies.
• E) If the fixed per order cost increases by 20%, then EOQ will increase by 20%.

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Definitions:

Consumer Durable Expenditures

Spending on goods that are expected to last for more than three years, such as appliances, vehicles, and furniture.

Corporate Tax Rate

The percentage of a corporation's profits that is paid as tax to the government.

Fixed Costs

Costs that do not change with the level of output or sales, such as rent or salaries.

Variable Costs

Costs that change in proportion to the level of production or business activity, such as materials and labor expenses.