Economic Order Quantity is the quantity ordered to minimise the total purchase cost of the inventory.Group of answer choicesTrueFalse
Question
Economic Order Quantity is the quantity ordered to minimise the total purchase cost of the inventory.
- Group of answer choices
- True
- False
Solution
Answer
The statement "Economic Order Quantity is the quantity ordered to minimise the total purchase cost of the inventory" is False.
Explanation:
Economic Order Quantity (EOQ) is a formula used to determine the optimal order quantity that minimizes the total inventory costs, which include holding costs, ordering costs, and sometimes shortage costs. However, it does not specifically minimize the total purchase cost of the inventory itself. The purchase cost remains constant regardless of the EOQ, as it pertains to the price per unit of goods. Thus, while EOQ helps manage and minimize total inventory costs, it does not focus solely on minimizing the total purchase costs.
In summary, the statement is not accurate as EOQ targets total inventory management costs rather than just purchasing costs.
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