Practice question · Select all that apply
Which statements about EOQ’s logic are correct?
Hints
- Two costs move in opposite directions as the order size grows.
- Near the bottom the total is famously insensitive to the exact quantity.
Show the answer
- A. At the optimum, ordering and holding costs are equal
- B. Larger order quantities increase annual holding costs
- D. Larger order quantities reduce annual ordering costs
Why
The U-curve’s two arms and their crossing at the bottom. Option 4 is the useful falsehood to unlearn: the valley is famously flat, so rounding EOQ to convenient pack sizes costs pennies.
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