Question

Ali had previously calculated the Economic Order Quantity required to efficiently control costs at his company. His calculations proved accurate in the short term. However, after a certain point, it was found that his calculations differed from the actual costs. What could have happened at this point to create a mismatch between Ali’s calculations and the actual expense?
A.
demand for the company’s product changed
B.
the company had an excess of intermediate inventory
C.
the storage capacity for output inventory was full
D.
salary increases were put on hold

Answer 1

The mismatch between Ali’s calculations using the Economic Order Quantity model and the actual expense was caused by A. demand for the company’s product changed.

What is the Economic Order Quantity model?

The Economic Order Quantity model (EOQ) shows the ideal order quantity a company should purchase or produce to minimize inventory costs (holding costs, shortage costs, and ordering costs).

EOQ assumes constant demand, ordering, and holding costs over time.

The model is computed as EOQ = square root of: [2(setup costs)(demand rate)] / holding costs.

Thus, the mismatch between Ali’s calculations using the Economic Order Quantity model and the actual expense was caused by A. demand for the company’s product changed.

Learn more about the Economic Order Quantity model at brainly.com/question/14215453

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