Answer (D) is correct . The EOQ model minimizes the total of ordering and carrying costs. The EOQ is calculated as follows: Increases in the numerator (demand or ordering costs) will increase the EOQ, whereas decreases in demand or ordering costs will decrease the EOQ. Similarly, a decrease in the denominator (carrying costs) will increase the EOQ.
Answer (A) is incorrect because A decrease in demand (annual sales), which is in the numerator, will decrease the EOQ.
Answer (B) is incorrect because A decrease in ordering costs will encourage more orders, or a decrease in the EOQ.
Answer (C) is incorrect because A decrease in safety stock levels will not affect the EOQ, although it might lead to a different ordering point.
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