Economic Order Quantity (EOQ) MCQ Quiz - Objective Question with Answer for Economic Order Quantity (EOQ) - Download Free PDF

Last updated on Jun 10, 2025

Latest Economic Order Quantity (EOQ) MCQ Objective Questions

Economic Order Quantity (EOQ) Question 1:

Which of the following does NOT belong to assumptions in calculating EOQ in the basic inventory model?

  1. Material cannot be supplied in variable quantities
  2. Demand is continuous
  3. Delivery of all items are instantaneous
  4. Lead time is constant

Answer (Detailed Solution Below)

Option 1 : Material cannot be supplied in variable quantities

Economic Order Quantity (EOQ) Question 1 Detailed Solution

Concept:

The Economic Order Quantity (EOQ) model is a fundamental inventory management formula used to determine the optimal order quantity that minimizes total inventory costs, including ordering and holding costs.

Standard Assumptions of EOQ:

  • Demand is known, constant, and continuous
  • Lead time (the time between ordering and receiving) is constant
  • Replenishment is instantaneous (all items are delivered at once)
  • No stockouts or shortages are allowed
  • Ordering and holding costs are constant and known

Analysis:

Option 1: "Material cannot be supplied in variable quantities" – This is not a part of EOQ assumptions. EOQ aims to determine the best (variable) quantity to order, making this statement invalid in the EOQ context.

Economic Order Quantity (EOQ) Question 2:

Given an annual usage value of 400 units, the procurement cost is ₹20 per order, cost per piece is ₹100 and cost of carrying inventory is 10%. Calculate the EOQ.

  1. 60
  2. 40
  3. 30
  4. 50

Answer (Detailed Solution Below)

Option 2 : 40

Economic Order Quantity (EOQ) Question 2 Detailed Solution

Concept:

EOQ (Economic Order Quantity) is calculated using the formula:

\( EOQ = \sqrt{\frac{2AD}{H}} \)

Where:

  • A = Annual demand = 400 units
  • D = Ordering cost = ₹20
  • H = Holding cost per unit per year = 10% of ₹100 = ₹10

Calculation:

\( EOQ = \sqrt{\frac{2 \times 400 \times 20}{10}} = \sqrt{\frac{16000}{10}} = \sqrt{1600} = 40 \)

 

Economic Order Quantity (EOQ) Question 3:

Demand for a product is 12,50,000 per annum. The company purchases this product in lots and sells them. The cost of a purchase order is ₹ 1500 and the cost of storage is ₹ 150 per piece per annum. EOQ will be: 

  1. 6000
  2. 7000
  3. 8000
  4. 5000

Answer (Detailed Solution Below)

Option 4 : 5000

Economic Order Quantity (EOQ) Question 3 Detailed Solution

Concept:

EOQ (Economic Order Quantity) is calculated by:

\( EOQ = \sqrt{\frac{2DS}{H}} \)

Given:

\( D = 12,50,000~\text{units/year},~S = ₹1500,~H = ₹150 \)

Calculation:

\( EOQ = \sqrt{\frac{2 \times 1250000 \times 1500}{150}} = \sqrt{25000000} = 5000 \)

 

Economic Order Quantity (EOQ) Question 4:

Economic Order Quantity is the quantity at which the cost of carrying is:

  1. Minimum
  2. Equal to the cost of ordering
  3. Less than the cost or ordering
  4. More than one of the above
  5. None of the above

Answer (Detailed Solution Below)

Option 2 : Equal to the cost of ordering

Economic Order Quantity (EOQ) Question 4 Detailed Solution

Explanation:

Economic order quantity is that size of the order which helps in minimizing the total annual cost of inventory in the organization.

When the size of order increases, the ordering costs (cost of purchasing, inspection, etc.) will decrease whereas the inventory carrying costs (costs of storage, insurance, etc.) will increase.

Economic Order Quantity (EOQ) is that size of order which minimizes total annual costs of carrying and cost of ordering.

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It is evident from above that the minimum total costs occur at a point where the ordering costs and inventory carrying costs are equal.

Economic Order Quantity (EOQ) Question 5:

800 units of certain item of stock are needed over each year period. If the unit cost is 400 and the cost of each order is 150, the carrying cost is 1.5%. Then the Economic Order Quantity (EOQ) is:

  1. 120
  2. 160
  3. 200
  4. 240

Answer (Detailed Solution Below)

Option 3 : 200

Economic Order Quantity (EOQ) Question 5 Detailed Solution

Concept:

The Economic Order Quantity (EOQ) is a formula used to determine the optimal order quantity that minimizes the total cost of inventory, including ordering and holding costs.

\( EOQ = \sqrt{\frac{2DS}{H}} \)

Where:

  • D" id="MathJax-Element-14-Frame" role="presentation" style="position: relative;" tabindex="0">D = Annual demand (units/year)
  • S" id="MathJax-Element-15-Frame" role="presentation" style="position: relative;" tabindex="0">S = Ordering cost per order
  • H" id="MathJax-Element-16-Frame" role="presentation" style="position: relative;" tabindex="0">H = Holding or carrying cost per unit per year

Given Data:

  • Demand D" id="MathJax-Element-17-Frame" role="presentation" style="position: relative;" tabindex="0">D = 800 units/year
  • Ordering cost S" id="MathJax-Element-18-Frame" role="presentation" style="position: relative;" tabindex="0">S = 150
  • Carrying cost percentage = 1.5%
  • Unit cost = 400

Calculate Carrying Cost per Unit:

\( H = 1.5\% \times 400 = \frac{1.5}{100} \times 400 = 6 \, \text{per unit per year} \)

Substitute into the EOQ Formula:

\( EOQ = \sqrt{\frac{2 \times 800 \times 150}{6}} = \sqrt{\frac{240000}{6}} = \sqrt{40000} = 200 \)

The Economic Order Quantity (EOQ) is 200 units.

Top Economic Order Quantity (EOQ) MCQ Objective Questions

If the cost of 157 litre of oil is Rs.  29763.65, then what is the cost per litre (rounded off to two decimal places)?

  1. Rs. 170.08
  2. Rs. 182.06
  3. Rs. 178.31
  4. Rs. 189.58

Answer (Detailed Solution Below)

Option 4 : Rs. 189.58

Economic Order Quantity (EOQ) Question 6 Detailed Solution

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Given:

The cost of 157 litre of oil is Rs.  29763.65

Calculation:

Cost price of 157 liters of oil = Rs. 29763.65

Cost price of 1 liter of oil = 29763.65/157

⇒ 189.577 ≈ 189.58

∴ The cost per liter is 189.58 (rounded off to two decimal places).

The demand rate for a particular item is 12000 units/year. The ordering cost is Rs.100 per order and the holding cost is Rs.0.80 per item per month. If no shortages are allowed and the replacement is instantaneous, then the economic order quantity is

  1. 1500 units
  2. 2000 units
  3. 500 units
  4. 1000 units

Answer (Detailed Solution Below)

Option 3 : 500 units

Economic Order Quantity (EOQ) Question 7 Detailed Solution

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Concept:

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This model is used when the replacement is instantaneous and no shortage is allowed. The Economic Order Quantity for this model is given by Wilson Formula.

\({Q^*} = \sqrt {\frac{{2D{C_o}}}{{{C_h}}}} \)

where Q* = Economic Order Quantity (Units), D = Demand rate (Units/month or Units/year), Co = Ordering cost/order (Rs.), Ch = Handling cost (Rs./unit/year)

[Note: Time unit of Demand & Handling Cost must be same i.e. units/year or units/month]

Calculation:

Given:

D = 12000 units/year, Co = Rs. 100, Ch = Rs. 0.80/unit/month ⇒ Rs. 0.80 × 12/unit/year

\(\;{Q^*} = \sqrt {\frac{{2D{C_o}}}{{{C_h}}}} \)

\( \Rightarrow {Q^*} = \sqrt {\frac{{2 \times 12000 \times 100}}{{0.80 \times 12}}} \)

⇒ Q* = 500 units.

The amount of time elapsed from the moment an inventory replenishment order is placed and the moment the supplier delivers the goods is

  1. lead time
  2. cycle time
  3. take time
  4. order time

Answer (Detailed Solution Below)

Option 1 : lead time

Economic Order Quantity (EOQ) Question 8 Detailed Solution

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Explanation:

Lead Time:

  • The time gap between the placing of an order and its actual arrival in the inventory is known as Lead Time.
  • Lead Time can be greater, less, or equal to Order Cycle.

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Order Cycle:

  • The time period between two successive orders is called Order Cycle.

Re-order Level (ROL):

  • The quantity in hand while placing the order.
  • ROL = Lead Time × Demand.

The demand for a commodity is 100 units per day. Every time an order is placed, a fixed cost of Rs. 400 is incurred. Holding cost is R. 0.08 per unit per day. If the lead time is 13 days, then the economic lot size and the recorder point are in units

  1. 800 and 130
  2. 840 and 100
  3. 890 and 300
  4. 1000 and 300

Answer (Detailed Solution Below)

Option 4 : 1000 and 300

Economic Order Quantity (EOQ) Question 9 Detailed Solution

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Concept:

The ordering quantity Q* at which holding cost becomes equal to ordering cost and the total inventory cost is minimum is known as Economic Order Quantity (EOQ).

At EOQ:

Ordering cost = Holding cost

\(\frac{D}{{{Q^*}}}{C_o} = \frac{{{Q^*}}}{2}{C_h}\)

\({Q^*} = \sqrt {\frac{{2D{C_o}}}{{{C_h}}}} \)

D = Annual or yearly demand for inventory (unit/day)

Q = Quantity to be ordered at each order point (unit/order)

Co = Cost of placing one order [Rs/order]

Ch = Cost of holding one unit in inventory for one complete year [Rs/unit/day]

Cycle time:

Order cycle time refers to the time period between placing one order and the next order.

\(T=\frac{Q}{D}\)

Re-order Level (ROL): 

The quantity in hand while placing the order.

Case - I

When lead time is lower than cycle time (TL < T).

ROL = Lead Time (TL) × Demand (D).

Case - II

When lead time TL is greater than cycle time T, then:

ROL = (TL - T) × Demand (D)

Calculation:

Given:

D = 100 unit/day, Co = 400 unit/order, Ch = 0.08 Rs./unit/day, Lead time TL = 13 days

EOQ:

\({Q^*} = \sqrt {\frac{{2D{C_o}}}{{{C_h}}}} \)

\({Q^*} = \sqrt {\frac{{2× 100×{400}}}{{{0.08}}}}=1000\;units \)

Cycle Time:

\(T=\frac{Q}{D}\)

\(T=\frac{1000}{100}=10\;days\)

TL > T

ROL = (TL - T) × Demand (D)

ROL = (13 - 10) × 100 = 300 units.

In the classical economic order quantity (EOQ) model, let Q and C denote the optimal order quantity and the corresponding minimum total annual cost (the sum of the inventory holding and ordering costs). If the order quantity is estimated incorrectly as Q′ = 2Q, then the corresponding total annual cost C′ is

  1. C′ = 1.25C
  2. C′ = 1.5C
  3. C′ = 1.75C
  4. C′ = 2C

Answer (Detailed Solution Below)

Option 1 : C′ = 1.25C

Economic Order Quantity (EOQ) Question 10 Detailed Solution

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Concept:

The total annual cost for the inventory system is given as:

 \(\mathbf{C~=~\frac{D}{Q}C_o~+~\frac{Q}{2}C_h}\)

where C is the total annual cost, D is the annual demand, Q is the order quantity, Co is the ordering cost and Ch is the holding cost per unit per year.

In economic order quantity (EOQ), \(\mathbf{\frac{D}{Q}C_o~=~\frac{Q}{2}C_h}\)

Calculation:

Given:

In economic order quantity,  

\(\frac{D}{Q}C_o=\frac{Q}{2}C_h\) or C = \(\frac{Q}{2}C_h~+~\frac{Q}{2}C_h\)

C = QCh

Now, the new order quantity is Q′ = 2Q, so the new total cost is

\(C^′~=~\frac{D}{Q^′ }C_o~+~\frac{Q^′}{2}C_h\) = \(C^′~=~\frac{D}{2Q }C_o~+~\frac{2Q}{2}C_h\)

⇒ \(\frac{1}{2}\left ( \frac{Q}{2}C_h \right)+QC_h\) = \( \frac{Q}{4}C_h~+~QC_h\) = \(\frac{5}{4}QC_h\)

∴ C′ = 1.25C  

In inventory planning, extra inventory is unnecessarily carried to the end of the planning period when using which of the following lot size decision policies?

  1. Part period total cost balancing
  2. EOQ lot size
  3. Lot-for-lot Production
  4. EPQ lot size

Answer (Detailed Solution Below)

Option 2 : EOQ lot size

Economic Order Quantity (EOQ) Question 11 Detailed Solution

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Explanation:

Economic Order Quantity (EOQ): 

  • A decision about how much to order has great significance in inventory management.
  • The quantity to be purchased should neither be small nor big because the costs of buying and carrying materials are very high.
  • Economic order quantity is the size of the lot to be purchased which is economically viable.
  • This is the number of materials that can be purchased at minimum costs.
  • Generally, economic order quantity is the point at which inventory carrying costs are equal to order costs.
  • First, EOQ policy is not optimal in MRP system because the assumptions of constant demand are not met.
  • As compared with a lot-for-lot policy, the setup costs for an EOQ policy will generally be lower and holding costs will be higher.
  • Second, in an EOQ policy, extra inventory is unnecessarily carried to the end of the planning horizon.

At EOQ:

Ordering cost = Holding cost

\(\frac{D}{{{Q^*}}}{C_o} = \frac{{{Q^*}}}{2}{C_h} \Rightarrow {Q^*} = \sqrt {\frac{{2D{C_o}}}{{{C_h}}}} \)

D = Annual or yearly demand for inventory (unit/year)

Q = Quantity to be ordered at each order point (unit/order)

Co = Cost of placing one order [Rs/order]

Ch = Cost of holding one unit in inventory for one complete year [Rs/unit/year]

A company uses 2555 units for an item annually, Delivery lead time is 8 days. The recorder point, in number of units, to order optimum quantity is

  1. 7
  2. 60
  3. 8
  4. 56

Answer (Detailed Solution Below)

Option 4 : 56

Economic Order Quantity (EOQ) Question 12 Detailed Solution

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Concept:

Reorder level is the inventory level at which a company should place a new order in order to maintain the stock for selling and running the business effectively.

Lead time represents the time gap between placing an order and when the order is received.

Reorder level (RoL) = Lead time × daily demand

Calculation:

Given:

The annual demand for item D = 2555 units, Lead time =  8 days

daily demand of item d = \(\frac{d}{365} = \frac{2555}{365}\)

= 7 units

Reorder level (RoL) = Lead time × daily demand

= 8 × 7 

= 56 units

Additional Information

  • The Economic order quantity or optimum quantity is the order quantity that minimizes the total holding cost and ordering cost in an inventory. At this point Holding cast is equal to ordering cast.

F1 Savita Engineering 6-7-22 D3

A company requires 16,000 units of raw material costing Rs. 2 per unit. The cost of placing an order is Rs. 45 and the carrying costs are 10% per year per unit of the average inventory. Determine the economic order quantity.

  1. 2684 Units
  2. 2434 Units
  3. 2520 Units
  4. 2052 Units

Answer (Detailed Solution Below)

Option 1 : 2684 Units

Economic Order Quantity (EOQ) Question 13 Detailed Solution

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Explanation:

Economic order quantity (EOQ):

  • Economic order quantity is the size of the order which helps in minimizing the total annual cost of inventory in the organization.
  • When the size of the order increases, the ordering costs (cost of purchasing, inspection, etc.) will decrease whereas the inventory carrying costs (costs of storage, insurance, etc.) will increase.
  • Economic Order Quantity (EOQ) is that size of order which minimizes total annual costs of carrying and cost of ordering.

RRB JE ME 39 15Q IM Part 2 Hindi - Final Diagram Madhu images Q6

  • It is evident from above that the minimum total costs occur at a point where the ordering costs and inventory carrying costs are equal.

At EOQ:

Ordering cost = Holding cost

\(\frac{D}{{{Q^*}}}{C_o} = \frac{{{Q^*}}}{2}{C_h} \ \)

\(\Rightarrow {Q^*} = \sqrt {\frac{2DC_o}{C_h}}\)

D = Annual or yearly demand for inventory (unit/year)

Q = Quantity to be ordered at each order point (unit/order)

Co = Cost of placing one order [Rs/order]

Ch = Cost of holding one unit in inventory for one complete year [Rs/unit/year]

Calculation:

Given: D =16,000 units, Cu = Rs. 2 per unit, Co = Rs. 45 per order, Ch = 10% of Cu = 0.10 × 2 Rs/unit/year

\(\Rightarrow {Q^*} = \sqrt {\frac{2 \times 16,000\times 45}{0.10 \times 2}}\)

\(\Rightarrow {Q^*} = 2683.28 \ Units\)

So, the closest answer will be option 1.

A manufacturing company purchases 9000 parts of a machine for its annual requirements ordering for month usage at a time, each part costing Rs. 20. The ordering cost per order is Rs. 15 and carrying charges are 15% of the average inventory per year. What should be the optimum order quantity?

  1. 200
  2. 300
  3. 400
  4. 500

Answer (Detailed Solution Below)

Option 2 : 300

Economic Order Quantity (EOQ) Question 14 Detailed Solution

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Concept:

Economic order quantity is given by:

\({EOQ}= \sqrt {\frac{2DC_o}{C_h}} \)

where D =  demand (unit/time), Co = ordering cost (Rs/order), Ch = cost of carrying inventory (Rs/unit/time)

Calculation:

Given:

D = 9000 \(\frac{{Units}}{{year}}\), Cost of one part (C) = Rs. 20, Co = Rs. 15/order

Ch = 15% of unit cost = \( \frac{{15}}{{100}} \times 20 = Rs.3/unit/year\)

Economic order quantity is:

\(\left( {EOQ} \right) = \sqrt {\frac{{2D{C_o}}}{{{C_h}}}} = \sqrt {\frac{{2 \times 9000 \times 15}}{3}} = 300~units\)

Find the economic batch quantity for the given data: Annual requirement of parts 800, inventory cost 10% of value/year, the setup cost is Rs. 200 per setup and the cost per part Rs. 20.

  1. 400
  2. 500
  3. 800
  4. 200

Answer (Detailed Solution Below)

Option 1 : 400

Economic Order Quantity (EOQ) Question 15 Detailed Solution

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Concept:

The ordering quantity Q* at which holding cost becomes equal to ordering cost and the total inventory cost is minimum is known as Economic order Quantity (EOQ).

At EOQ:

Ordering cost = Holding cost

\(\frac{D}{{{Q^*}}}{C_o} = \frac{{{Q^*}}}{2}{C_h} \Rightarrow {Q^*} = \sqrt {\frac{{2D{C_o}}}{{{C_h}}}} \)

D = Annual or yearly demand of inventory (unit/year)

Q = Quantity to be ordered at each order point (unit/order)

Co = Cost of placing one order [Rs/order]

Ch = Cost of holding one unit in inventory for one complete year [Rs/unit/year]

Calculation:

D = 800 units, Co = Rs. 200, Ch = 10% of value/year = Rs. 2

\({{\rm{Q}}^{\rm{*}}} = \sqrt {\frac{{2{\rm{D}}{{\rm{C}}_{\rm{o}}}}}{{{{\rm{C}}_{\rm{h}}}}}} = \sqrt {\frac{{2 \times 800 \times 200}}{{2}}} = 400{\rm{\;units}}\)

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