Question

Which of the following is / are true regarding EOQ?
i) EOQ analysis does not take inflation into account.
ii) If inflation rate is predicated, EOQ formula cannot be modified.
iii) If inflation rate is known it should be added to the annual carrying cost expressed as a percentage.
iv) Inflation ratio should be added to the percentage of fixed cost.
v) Average inventory and EOQ definitely increase during inflationary period.

• A. i & iii
• B. ii, iv, v
• C. iii & v
• D. i, iii, v
• E. i, v

Answer 1

The correct option is A i & iii

EOQ does not take inflation into consideration. However, when the inflation is predictable accurately, then the EOQ formula can be modified. If the inflation rate is known, it should be added to the annual carrying cost expressed as a percentage.