Choice "B" is correct. A decrease in carrying costs would increase the Economic Order Quantity (EOQ).Choices "c", "d", and "a" are incorrect because a decrease in any one of them would decrease the EOQ (or have no effect on it), as follows:
c. | Decreased cost per order requires fewer units. |
d. | Decreased safety stock level requires fewer units. |
a. | Decreased quantity demanded requires fewer units. |
Where:
EOQ | = | Order size |
S | = | Annual Sales quantity in units |
O | = | Cost per purchase Order |
C | = | Annual cost of Carrying one unit in stock for one year |
Order size gets larger as "S" or "O" gets bigger (numerator) or as "C" gets smaller (denominator).
