Question

Economic order quantity aims at minimizing

• A. Ordering cost
• B. Carrying cost
• C. Both
• D. Suppliers cost

Hint:

EOQ is used to minimize the total cost of inventory by balancing ordering and carrying costs.

Answer 1

The Correct Option is C

Step 1: Understanding economic order quantity (EOQ).
Economic Order Quantity (EOQ) is a formula used to determine the optimal order quantity that minimizes both ordering and carrying costs in inventory management. The aim is to find a balance where these two costs are minimized.
Step 2: Analyzing the options.
(A) Ordering cost: This is part of the goal, but EOQ also considers carrying costs.
(B) Carrying cost: This is another part of the goal, but EOQ also aims to minimize ordering costs.
(C) Both: Correct — EOQ minimizes both ordering and carrying costs to achieve the optimal inventory level.
(D) Suppliers cost: EOQ does not directly minimize suppliers’ costs, but focuses on internal inventory-related costs.
Step 3: Conclusion.
The correct answer is (C) Both as EOQ aims at minimizing both ordering and carrying costs.