The Production Order Quantity model in inventory management A. results in larger average inventory than an equivalent EOQ model B. uses Ordering Cost, not Setup Cost, in its formula C. relaxes the assumption of known and constant demand D. is appropriate when units are sold/used as they are produced

Question

14-01-2021
Business

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The Production Order Quantity model in inventory management A. results in larger average inventory than an equivalent EOQ model B. uses Ordering Cost, not Setup Cost, in its formula C. relaxes the assumption of known and constant demand D. is appropriate when units are sold/used as they are produced

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Answer: D. is appropriate when units are sold/used as they are produced

Explanation:

The economic production quantity model is sometimes referred to as the EPQ model and it is used to know the amount of goods or services that a company should order so that the total inventory costs can be reduced.

From the options given, it should be noted that the economic production order quantity is appropriate when units are sold/used as they are produced.

Therefore, the correct option is D.