Question

Jones Company has calculated that the EOQ for a particular item is 1,000 units. However, Jones does not have enough capital to order that many units each time, so it only orders 250 units at a time. This will result in:

Answer 1

The economic order quantity (EOQ) is used to minimize purchase costs and carrying costs (inventory costs) in a company. If Jones cannot purchase enough goods to meet the EOQ, its carrying costs will probably be a little lower, but its purchasing costs will be much higher, resulting in a net increase in costs.