Which ONE of the following would not normally be considered …
Which ONE of the following would not normally be considered a cost of holding inventory?
(A) Inventory obsolescence
(B) Insurance cost of inventory
(C) Lost interest on cash invested in inventory
(D) Loss of sales from running out of inventory
An entity uses the economic order quantity model (EOQ model). Demand for the entity’s product is 36,000 units each year and is evenly distributed each day. The cost of placing an order is $10 and the cost of holding a unit of inventory for a year is $2. How many orders should the entity make in a year?
(A) 60
(B) 120
(C) 300
(D) 600
An entity uses the economic order quantity model (that is, the EOQ model) to manage inventory.
Situation 1 – interest rates rise.
Situation 2 – sales volumes increase.
What would happen to the economic order quantity in each of these two situations?
Situation 1
Situation 2
(A)
Increase
Increase
(B)
Increase
Decrease
(C)
Decrease
Increase
(D)
Decrease
Decrease
