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In inventory control, which costs can vary with order quantity ?

  • A.unit cost only
  • B.reorder cost only
  • C.holding cost only
  • D.all of the above

Answer: D

The answer is all of the above.

In inventory models, the annual holding cost rises with the order quantity Q (average stock is about Q/2), and the annual ordering (reorder) cost falls with Q, since fewer orders are placed, about D/Q per year. The unit purchase cost can also depend on Q when suppliers offer quantity discounts for larger orders.

So each of the three costs can vary with the order quantity, and the options naming only one of them are incomplete.

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