The EOQ is achieved when the annual total inventory cost is a the minimum. This

Question

The EOQ is achieved when the annual total inventory cost is a the minimum. This happens when A. Annual holding cost is at the lowest B. Annual ordering cost is at the lowest C. Annual holding cost equals annual ordering cost D. Annual holding cost is smaller than annual ordering cost The EOQ is achieved when the annual total inventory cost is a the minimum. This happens when A. Annual holding cost is at the lowest B. Annual ordering cost is at the lowest C. Annual holding cost equals annual ordering cost D. Annual holding cost is smaller than annual ordering cost A. Annual holding cost is at the lowest B. Annual ordering cost is at the lowest C. Annual holding cost equals annual ordering cost D. Annual holding cost is smaller than annual ordering cost

Explanation / Answer

The EOQ is achieved when the annual total inventory cost is a the minimum. This happens when

C. Annual holding cost equals annual ordering cost

correct answer is option C

Explanation:

Total Inventory Cost TC = Ordering cost + holding cost, TC = ( D/Q) Co + ( Q/2) Ch

And the minimum total inventory cost TC* = ( D/Q*) Co + ( Q*/2) Ch = sqrt (2D* Co *Ch)

Where Q* is the EOQ

Over a period of time, a company can use two policies for making inventory decisions.

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