The time value of money, opportunity cost, is not part of the calculation of EOQ holding cost (T/F)
Question
The time value of money, opportunity cost, is not part of the calculation of EOQ holding cost (T/F)
Solution
False. The Economic Order Quantity (EOQ) model does take into account holding costs, which can be influenced by the time value of money and opportunity costs. The EOQ model calculates the optimal quantity of inventory to order to minimize total inventory costs, which include order costs and holding costs. Holding costs are the costs to hold or carry inventory over time, which can include storage costs, insurance, spoilage, and the opportunity cost of money tied up in inventory. Therefore, the time value of money and opportunity cost can be part of the calculation of EOQ holding cost.
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