EOQ is the quantity that minimizes ?

A

(b)Total Inventory Cost,

It provides best mix between ordering and carrying cost of inventory and therefore reduces overall inventory cost.

Total ordering cost, answer (a).

Economic order quantity is the order quantity that minimizes total inventory holding costs and ordering costs. It is one of the oldest classical production scheduling models. The framework used to determine this order quantity is also known as Wilson EOQ Model or Wilson Formula.

What is the EOQ Model?

• Cost Minimizing “Q”
• Assumptions:
  • Relatively uniform & known demand rate
  • Fixed item cost
  • Fixed ordering and holding cost
  • Constant lead time

(Of course, these assumptions don’t always hold, but the model is pretty robust in practice.)

A 

Economic Order Quantity Model reduces the ordering cost and inventory holding costs.  A and B is the correct answer.  A bulk order will be placed which will avoid repeated orders thus reducing the ordering costs, items can be procured at a lower price as the order is placed for a larger quantity. Inventory holding costs will be less as the items will be supplied whenever the item reaches the stipulated reorder level based on internal stock level requirements.

B

Economic Ordering Quantity reduces

A): Total Ordering Cost

(a)Total Ordering Cost,

,

Economic order quantity is the order quantity that minimizes total inventory holding costs and ordering costs

(A) Total Ordering Cost

The economic order quantity (EOQ) is the order quantity that minimizes total holding and ordering costs for the year.

and it could be D "Safety Stock Level" too.

A correct answer