Question

Which one of the following statements concerning the economic order quantity (EOQ) model is TRUE? An increase in holding cost will increase the EOQ. A decrease in demand will increase the EOQ. A decrease in holding cost will increase the EOQ. None of the above is true.

Answer 1

Answer:

C.- ↓Holding Cost  = ↑Economic Order Quantity

Explanation:

$eoq = \sqrt{ \frac{2ds}{h} }$

Economic Order Quantity = square root of (2DS/H)

Where:

Demand and setup are in the dividend part, if they increase, the EOQ increase.

Holding cost goes in the divisor, if they increase the EOQ decrease

A- FALSE ↑Holding Cost ≠↑Economic Order Quantity

B- FALSE ↑Demand ≠↑EOQ

C.- Correct ↓Holding Cost  = ↑Economic Order Quantity

  The divisor is lower, so the value increase.