The correct answer is:
EOQ higher, PO lower.
If inventory holding costs fall, it will make sense for Pebbles Co to hold higher levels of inventory.
It is likely, therefore, that Pebbles Co will make fewer orders in the year, but that each order will be for a higher volume of inventory.
If the order size increases then the EOQ will be higher. Similarly, if fewer orders are placed each year,then the annual cost of placing purchase orders will be lower. |
