Question

Edwards Manufacturing Corporation uses the standard economic order quantity:

a) To minimize holding costs
b) To reduce ordering costs
c) To balance holding and ordering costs
d) To maximize inventory turnover

Answer 1

The economic order quantity model is used by Edwards Manufacturing Corporation to balance the total costs of holding and ordering inventory, supporting cost-effective inventory management.

Step-by-step explanation:

Edwards Manufacturing Corporation uses the standard economic order quantity (EOQ) model primarily c) To balance holding and ordering costs. The EOQ is a pivotal tool in inventory management that aims to determine the optimal order size that minimizes the total cost of inventory, including both holding costs and ordering costs. This approach is deeply rooted in cost-efficiency principles found in economies of scale, where increasing the quantity of output can decrease the cost per unit.

Choosing an optimal order quantity enables businesses to operate more efficiently, akin to how warehouse stores like Costco and Walmart benefit from large scale operations. Therefore, the EOQ helps firms like Edwards Manufacturing Corporation to maintain low costs while ensuring sufficient stock to meet customer demand without excessive inventory that can incur additional holding costs.