Which of the following is NOT one of the assumptions of the basic Economic Order Quantity (EOQ) model?

• A. No stockouts are allowed; inventory is always replenished before it runs out.
• B. Demand is constant and known with certainty.
• C. Orders are received instantaneously (lead time is zero).
• D. Quantity discounts are available for large orders.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the Economic Order Quantity (EOQ) model assumptions. The EOQ model is a fundamental inventory management tool that helps determine the optimal order quantity minimizing total inventory costs.
2. Step 2: Recall the key assumptions of the basic EOQ model: (a) Demand is constant and known with certainty, (b) No stockouts are allowed, meaning inventory is replenished before it runs out, and (c) Orders are received instantaneously, implying zero lead time.
3. Step 3: Analyze the given options and identify which one does not fit these assumptions. The option 'Quantity discounts are available for large orders' introduces price variability based on order size, which is not assumed in the basic EOQ model.
4. Step 4: Recognize that the basic EOQ model assumes a constant unit price, so quantity discounts violate this assumption and require a more complex model to handle price breaks.
5. Step 5: Conclude that the statement 'Quantity discounts are available for large orders' is NOT an assumption of the basic EOQ model, while the other options are standard assumptions.