Which of the following is NOT an assumption of the basic Economic Order Quantity (EOQ) model?

• A. Demand is constant and known
• B. Orders are received instantaneously
• C. Lead time is variable and unpredictable
• D. No quantity discounts are available

Answer: (C)

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, (b) Orders are received instantaneously (no delay in receiving inventory), (c) No quantity discounts are available, and (d) Lead time is constant and known (not variable).
3. Step 3: Analyze the given options and identify which one contradicts the EOQ assumptions. Since the EOQ model assumes lead time is constant and predictable, the statement 'Lead time is variable and unpredictable' does not fit the model assumptions.
4. Step 4: Conclude that the option 'Lead time is variable and unpredictable' is NOT an assumption of the basic EOQ model because it violates the requirement of a known and constant lead time.
5. Step 5: Summarize that understanding these assumptions is crucial because the EOQ formula and its optimality depend on these conditions being met.