In the classical economic order quantity (EOQ) model, let Q and C denote the optimal order quantity and the corresponding minimum total annual cost (the sum of the inventory holding and ordering costs). If the order quantity is estimated incorrectly as Q′ = 2Q, then the corresponding total annual cost C′ is
A. C′ = 1.25C
B. C′ = 1.5C
C. C′ = 1.75C
D. C′ = 2C
Answer:A
In the classical economic order quantity (EOQ) model, let Q and C denote the optimal order quantity and the corresponding minimum total annual cost (the sum of the inventory holding and ordering costs). If the order quantity is estimated incorrectly as Q′ = 2Q, then the corresponding total annual cost C′ is
A. C′ = 1.25C B. C′ = 1.5C C. C′ = 1.75C D. C′ = 2C