Mechanical Engineering Exam > Mechanical Engineering Questions > Economic Order Quantity is the quantity at w...
Start Learning for Free
Economic Order Quantity is the quantity at which the cost of carrying is
- a)minimum
- b)equal to the cost of ordering
- c)less than the cost of ordering
- d)cost of over-stocking
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
Economic Order Quantity is the quantity at which the cost of carrying...
Explanation:
Economic Order Quantity (EOQ) is a method used in inventory management to determine the optimal quantity of goods to order at one time in order to minimize the total costs associated with ordering and carrying inventory. The EOQ formula takes into account the cost of ordering, the cost of carrying inventory, and the demand for the product.
The formula for EOQ is:
EOQ = √((2DS)/H)
Where:
D = Annual demand
S = Cost of placing an order
H = Holding cost per unit per year
Minimum Cost:
The objective of EOQ is to find the quantity that minimizes the total cost of ordering and carrying inventory. The total cost includes the cost of ordering and the cost of carrying inventory. When the quantity ordered is too small, the cost of ordering will be high, as the order will need to be placed frequently. On the other hand, if the quantity is too large, the cost of carrying inventory will be high, as the inventory will need to be stored for a longer period of time. Therefore, the optimal quantity is the one that minimizes the total cost.
Equal Cost:
The EOQ model is based on the assumption that the cost of ordering and the cost of carrying inventory are the only costs associated with inventory. The optimal quantity is the one that balances the cost of ordering and the cost of carrying inventory. When the quantity ordered is equal to the EOQ, the total cost of ordering and carrying inventory is minimized.
Less than the Cost of Ordering:
If the quantity ordered is less than the EOQ, the cost of ordering will be high, as the order will need to be placed frequently. This will increase the total cost of ordering and carrying inventory.
Cost of Over-stocking:
If the quantity ordered is more than the EOQ, the cost of carrying inventory will be high, as the inventory will need to be stored for a longer period of time. This will increase the total cost of ordering and carrying inventory, and may lead to over-stocking, which can result in additional costs such as obsolescence and storage costs.
Conclusion:
In conclusion, the Economic Order Quantity (EOQ) is the quantity at which the cost of carrying is equal to the cost of ordering. The EOQ model is based on the assumption that the cost of ordering and the cost of carrying inventory are the only costs associated with inventory. When the quantity ordered is equal to the EOQ, the total cost of ordering and carrying inventory is minimized.
Economic Order Quantity (EOQ) is a method used in inventory management to determine the optimal quantity of goods to order at one time in order to minimize the total costs associated with ordering and carrying inventory. The EOQ formula takes into account the cost of ordering, the cost of carrying inventory, and the demand for the product.
The formula for EOQ is:
EOQ = √((2DS)/H)
Where:
D = Annual demand
S = Cost of placing an order
H = Holding cost per unit per year
Minimum Cost:
The objective of EOQ is to find the quantity that minimizes the total cost of ordering and carrying inventory. The total cost includes the cost of ordering and the cost of carrying inventory. When the quantity ordered is too small, the cost of ordering will be high, as the order will need to be placed frequently. On the other hand, if the quantity is too large, the cost of carrying inventory will be high, as the inventory will need to be stored for a longer period of time. Therefore, the optimal quantity is the one that minimizes the total cost.
Equal Cost:
The EOQ model is based on the assumption that the cost of ordering and the cost of carrying inventory are the only costs associated with inventory. The optimal quantity is the one that balances the cost of ordering and the cost of carrying inventory. When the quantity ordered is equal to the EOQ, the total cost of ordering and carrying inventory is minimized.
Less than the Cost of Ordering:
If the quantity ordered is less than the EOQ, the cost of ordering will be high, as the order will need to be placed frequently. This will increase the total cost of ordering and carrying inventory.
Cost of Over-stocking:
If the quantity ordered is more than the EOQ, the cost of carrying inventory will be high, as the inventory will need to be stored for a longer period of time. This will increase the total cost of ordering and carrying inventory, and may lead to over-stocking, which can result in additional costs such as obsolescence and storage costs.
Conclusion:
In conclusion, the Economic Order Quantity (EOQ) is the quantity at which the cost of carrying is equal to the cost of ordering. The EOQ model is based on the assumption that the cost of ordering and the cost of carrying inventory are the only costs associated with inventory. When the quantity ordered is equal to the EOQ, the total cost of ordering and carrying inventory is minimized.
|
Explore Courses for Mechanical Engineering exam
|
|
Top Courses for Mechanical EngineeringView all
Question Description
Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer? for Mechanical Engineering 2025 is part of Mechanical Engineering preparation. The Question and answers have been prepared according to the Mechanical Engineering exam syllabus. Information about Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Mechanical Engineering 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer?.
Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer? for Mechanical Engineering 2025 is part of Mechanical Engineering preparation. The Question and answers have been prepared according to the Mechanical Engineering exam syllabus. Information about Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Mechanical Engineering 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer?.
Solutions for Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer? in English & in Hindi are available as part of our courses for Mechanical Engineering.
Download more important topics, notes, lectures and mock test series for Mechanical Engineering Exam by signing up for free.
Here you can find the meaning of Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer?, a detailed solution for Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer? has been provided alongside types of Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Economic Order Quantity is the quantity at which the cost of carrying isa) minimumb) equal to the cost of orderingc) less than the cost of orderingd) cost of over-stockingCorrect answer is option 'B'. Can you explain this answer? tests, examples and also practice Mechanical Engineering tests.
|
|
Explore Courses for Mechanical Engineering exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup