A company is using the Economic Order Quantity (EOQ) model to manage its inventories. Suppose its annual
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A company is using the Economic Order Quantity (EOQ) model to manage its inventories. Suppose its annual demand doubles, while the ordering cost per order and inventory holding cost per unit per year do not change. What will happen to the total annual variable cost? The annual variable cost includes the annual ordering cost and annual inventory holding cost?
a) It doubles.
b) It increases by 41.42%.
c) It remains the same.
d) The impact depends upon the value of the ordering cost.
e) It quadruples (increases by 400%).
Economic Order QuantityEconomic order quantity (EOQ) is the ideal order quantity a company should purchase to minimize inventory costs such as holding costs, shortage costs, and order costs. This production-scheduling model was developed in 1913 by Ford W. Harris and has...
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Related Book For 
Essentials Of Business Analytics
ISBN: 611
1st Edition
Authors: Jeffrey Camm, James Cochran, Michael Fry, Jeffrey Ohlmann, David Anderson, Dennis Sweeney, Thomas Williams
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