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holding cost

This topic has 1 reply, 2 voices, and was last updated 11 years ago by John Moffat.

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June 15, 2014 at 7:33 am #176596
josy87
Member
- Topics: 172
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Hi Sir
Please I need to understand this….
A company determine its order quantity using the EOQ formula.
what would be the effect of the EOQ and the total and the total annual order cost of and increase in the holding cost per unit?
A higher higher
B lower higher
C higher lower
D lower lower
June 15, 2014 at 8:55 am #176599
John Moffat
Keymaster
- Topics: 57
- Replies: 54758
If holding cost increases, the Ch increases and if you look at the formula is means that the EOQ will be lower.
If the EOQ is lower it will mean more orders a year, and so the total annual order cost will be higher.
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