Question

The economic order quantity is the ideal:

options:
a. Number of items which should be included in one package.
b. Average level of inventory which a firm should hold.
c. Number of items to purchase at one time to eliminate carrying costs.
d. Order size to minimize order costs.
e. Restocking quantity to minimize inventory costs.

Answer 1

The economic order quantity is the order size that minimizes the total cost of ordering and holding inventory.

Step-by-step explanation:

The economic order quantity (EOQ) is the order size that minimizes the total cost of ordering and holding inventory. It is the sweet spot where ordering costs and carrying costs are minimized. EOQ takes into account the cost of placing an order and the cost of holding inventory.

For example, if the ordering cost is high, it would be more cost-effective to place fewer large orders. On the other hand, if the carrying cost is high, it would be more efficient to place more frequent but smaller orders.

In summary, the economic order quantity is the order size that minimizes the total cost of ordering and holding inventory.