CAF-5 · Chapter 16 · Question 1 of 10
What is the primary objective of using the Economic Order Quantity (EOQ) model in inventory management?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) To minimize the sum of total annual holding costs and total annual ordering costs.
Explanation
The fundamental principle of the EOQ model is to find the perfect balance (the optimal order size) where the total annual costs of placing orders and the total annual costs of holding the inventory are minimized.
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