In EOQ discussions, which term is used interchangeably with 'holding costs'?

• A. Ordering Costs
• B. Stockout Costs
• C. Purchase Price
• D. Carrying Costs

Answer: (D)

Holding costs, discussed in EOQ, are the same as carrying costs. They cover the expense of keeping inventory on hand over time—essentially the capital tied up in stock plus storage, insurance, depreciation, obsolescence, and handling. These costs are typically expressed per unit per period or as a percentage of the purchase price. EOQ aims to balance these carrying (holding) costs against ordering costs, so the term used for the cost of keeping inventory is carrying costs.

Other terms refer to different cost areas: ordering costs are the expenses of placing and receiving orders; stockout costs occur when inventory runs out and demand is unmet; purchase price is the cost to buy the items, a separate input to the model.