A is corrent. The economic order quantity (EOQ) formula was developed on the basis of the following assumptions:
1. Demand occurs at a constant rate throughout the year and is known with certainty.
2. Lead-time on the receipt of orders is constant.
3. The entire quantity ordered is received at one time.
4. The unit costs of the items ordered are constant; thus, there can be no quantity discounts.
5. There are no limitations on the size of the inventory.
A is corrent because it is assumption 1.
B is incorrect because it contradicts the assumption, "There are no limitations on the size of the inventory."
C is incorrect because it is the opposite of the assumption, "The unit costs of the items ordered are constant; thus, there can be no quantity discounts."
D is incorrect because it is the opposite of the assumption, "The unit costs of the items ordered are constant; thus, there can be no quantity discounts."
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