Question

The management at Barks-a-Million is considering a new inventory control system. The current system is inadequate because it frequently causes stockouts that interrupt production and lead to excess stock of other materials — resulting in markdowns and high carrying costs. The new system will focus on reducing or completely eliminating carrying costs, most likely employing

A		materials requirements planning.
B		a reorder point.
C		a just-in-time inventory system.
D		the economic order quantity.

Answer 1

Option D is the answer Economic order Quantity
Economic order quantity is a quantity of the materials the purchasing department should order so that all three costs (ordering costs, carrying costs and shortage costs) are minimized.