Which of the Following Is True of the EOQ Model

question 61

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%.

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Definitions:

Returns to Scale

The rate at which output increases as inputs are proportionally increased in the production process.

Production Function

A Production Function describes the relationship between inputs used in production and the output resulting from their use, showing how output changes as inputs change.

Output Levels

Refers to the quantity of goods or services produced by a company or economy over a certain period.

Returns to Scale

The rate at which production output increases as a result of a proportional increase in all inputs.