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Two companies have the same inventory holding and ordering costs and serve the same (constant) rate...

Two companies have the same inventory holding and ordering costs and serve the same (constant) rate of demands. Companies re- ceive orders from a supplier at different delivery rates, which exceed the rate of demand. Both companies use the EOQ model to optimize their order size. Suppose that company A places orders less frequently than company B. Question: Which statement(s) below is true (check all that apply).

a) the supplier delivers components at a faster rate to A than to B. b) the supplier delivers components at a faster rate to B than to A. c) A has a higher total cost than B.
d) B has a higher total cost than A.

e) while delivery rates may differ, the total cost is same for both companies.

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Answer #1

The correct option=d) B has a higher total cost than A.

Reason= Tota cost=ordering cost + the inventory holding cost

As B places more orders than A thus he has to pay more ordering and holding cost that will increase the total cost of the inventory

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