GATE ME 2023 Set 1 — Question 13
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Industrial Engineering → Inventory Control → EOQ Model
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Question
With reference to the Economic Order Quantity (EOQ) model, which one of the options given is correct?
Correct answer
(A) Curve P1: Total cost, Curve P2: Holding cost, Curve P3: Setup cost, and Curve P4: Production cost.
Solution
In the Economic Order Quantity (EOQ) model, the total cost is the sum of ordering cost, holding cost, and unit cost.
1.Total Cost (Curve P1): . It is a U-shaped curve representing the sum of all costs.
2.Holding Cost (Curve P2): . It is a linear function of starting from the origin, as holding cost increases with inventory level.
3.Setup/Ordering Cost (Curve P3): . It is a rectangular hyperbola, as ordering cost per unit decreases with larger order quantities.
4.Production/Unit Cost (Curve P4): . It is a constant value independent of order quantity, represented by a horizontal line.
Therefore, Option (A) correctly identifies all curves.Continue learning with Success Tracker
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