Question

Economic Order Quantity computes:

A: Cost of an order

B: Re-order level

C: Cost of stock

D: Optimum Order size​

Answer 1

D: Optimum Order size​

Step-by-step explanation:

Economic Order Quantity (EOQ) is a formula applied in logistic and supply chain management to calculate a business's ideal order size. As the name suggests, the order EOQ provides an order quantity that makes economic sense.

Economies of scale suggest that a bigger order size is better because the business will save transport costs. However, ordering in large quantities increases the cost of holding stock. The economic order quantity strikes a balance between these two important factors.