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When Using the EOQ formula

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Answer #1

Question 48

The correct Option is C - Relevant Carrying costs are equal to relevant ordering costs.

Explanation

The Economic Order Quantity is a set point designed to help companies minimize the cost of ordering and holding inventory. The cost of ordering inventory falls with the increase in ordering volume due to purchasing on economies of scale. However, as the size of inventory grows, the cost of holding the inventory rises. EOQ is the exact point that minimizes both of these inversely related costs.


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