What is Economic Order Quantity?

The correct answer is D. Optimum order size.

Economic order quantity (EOQ) is the order quantity that minimizes the total inventory costs, including ordering costs and holding costs. It is calculated by taking into account the following factors:

• The cost of placing an order
• The cost of holding inventory
• The demand for the product
• The lead time for the product

The EOQ can be calculated using the following formula:

EOQ = √(2DC/h)

where:

D = demand for the product in units per year
C = cost of placing an order
h = holding cost per unit per year

The EOQ is the optimal order size because it minimizes the total inventory costs. By ordering the optimal quantity, businesses can save money on both ordering costs and holding costs.

Option A is incorrect because the cost of an order is just one of the factors that goes into calculating the EOQ.

Option B is incorrect because the cost of stock is not a factor that goes into calculating the EOQ.

Option C is incorrect because the reorder level is the level of inventory at which a new order should be placed. It is not the same as the EOQ.