Question

If your company had an annual purchase cost of items equal to $2,000,000, an annual holding cost of $150,000 and an annual ordering cost of $750,000 this scenario would reveal that:a. Nothing because there is insufficient information to discern where the EOQ would be. b. Your fixed lot size was lower than the EOQ c. Your fixed lot size was equal to the EOQ d. Your fixed lot size was higher than the EOQ.

Answer 1

Answer:

c. Your fixed lot size was equal to the EOQ.

Explanation:

At economic order quantity, the Holding cost is equal Ordering cost . Since Holding cost is higher than the Ordering cost, less number of orders are placed and more inventory is being stored.