Answer (D) is correct . A manufacturer can use the EOQ model by substituting production set-up costs for ordering costs. Set-up costs are the manufacturer’s equivalent of ordering costs. The result is sometimes referred to as the economic batch quantity.
Answer (A) is incorrect because Insurance and taxes are carrying costs.
Answer (B) is incorrect because Obsolescence and deterioration are carrying costs.
Answer (C) is incorrect because Storage and handling are carrying costs.
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