Supply Chain Management Professional (SCMP) · Question
What is the main purpose of calculating 'economic order quantity' (EOQ)?
EOQ is a formula used to calculate the ideal order quantity that minimizes the combined costs of ordering and holding inventory. It balances these two costs.
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Question: What is the main purpose of calculating 'economic order quantity' (EOQ)?
Answer options:
- To determine the optimal number of suppliers for an item.
- To identify the minimum inventory level to avoid stockouts. ✅ To minimize the total cost of ordering and holding inventory.
- To forecast future demand for a product.
Correct answer: To minimize the total cost of ordering and holding inventory.
Explanation: EOQ is a formula used to calculate the ideal order quantity that minimizes the combined costs of ordering and holding inventory. It balances these two costs.
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