The Annual Ordering Cost in the Economic Order Quantity (EOQ)

question 13

Multiple Choice

The annual ordering cost in the economic order quantity (EOQ) model is:

• A)D/Q
• B)KD/Q
• C)icQ/2
• D)(s+ic)Q/2

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Definitions:

Average Variable Cost

The total variable costs incurred by a firm divided by the quantity of output produced.

Marginal Cost

The extra cost resulting from the manufacture of an additional unit of a product or service.

Average Fixed Cost

The total fixed costs of production divided by the quantity of output produced, indicating how fixed costs dilute with increased production.

AFC Curve

The Average Fixed Cost curve, depicting how the fixed costs of production spread over different quantities of output affect the total cost per unit.