The quantity to be purchased which minimizes total costs.

• A. Economic order quantity
• B. Just-in-time quantity
• C. Economic batch size
• D. Safety stock quantity

Answer: (A)

Balancing fixed ordering costs and holding costs to minimize total inventory costs is the essence of the Economic Order Quantity. This approach determines how much to order each time so that the annual cost of placing orders and the annual cost of holding inventory are as small as possible. Under the usual assumptions—constant demand, a fixed cost per order, and a holding cost per unit per year—the total cost is the sum of annual ordering costs (D/Q × S) and annual holding costs (Q/2 × H). Minimizing this total leads to the optimal order quantity Q* = sqrt(2DS/H). This quantity minimizes total costs associated with inventory purchases.

Other concepts differ in focus: Just-in-time aims to reduce or nearly eliminate inventory by receiving goods only as needed; safety stock is extra inventory held to guard against uncertainty; and economic batch size is about production lot sizes to minimize setup or changeover costs, not the purchasing quantity under EOQ assumptions.