The Total Annual Cost for the Economic Order Quantity Model

question 52

Multiple Choice

The total annual cost for the economic order quantity model is

• A) purchase cost + ordering cost + holding cost.
• B) fixed ordering cost + holding cost.
• C) purchase cost + fixed ordering cost.
• D) unit cost + variable ordering cost + holding cost.

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Definitions:

Savings Rate

The portion of disposable income not spent on consumption of goods and services but saved or invested, usually expressed as a percentage of disposable income.

Consumption

Consumption refers to the use of goods and services by households for personal satisfaction or living standards.

Credit Availability

Refers to the ease with which individuals or businesses can obtain loans or credit from financial institutions.

Durable Goods

are items with a long life expectancy, such as automobiles, furniture, and appliances, typically used over years rather than consumed quickly.