Which statement best describes the relationship between EOQ and reorder level?

Which statement best describes the relationship between EOQ and reorder level?

• A. Reorder level determines order quantity; EOQ determines safety stock
• B. EOQ and reorder level are the same
• C. EOQ determines safety stock; reorder level determines order quantity
• D. EOQ determines order quantity; reorder level determines when to order

Answer: (D)

The main idea is that EOQ and reorder level solve different inventory decisions. EOQ answers how much to order each time, aiming to minimize total costs from ordering and holding stock. Reorder level answers when to order, ensuring you don’t run out during the supplier’s lead time by triggering a replenishment at a certain inventory level (often lead-time demand plus safety stock). Because of this separation, the correct statement is that EOQ determines order quantity while reorder level determines when to order. The order quantity from EOQ is not about timing, and the reorder level is not about how much you order. The other options mix up these roles or claim they are the same.

The main idea is that EOQ and reorder level solve different inventory decisions. EOQ answers how much to order each time, aiming to minimize total costs from ordering and holding stock. Reorder level answers when to order, ensuring you don’t run out during the supplier’s lead time by triggering a replenishment at a certain inventory level (often lead-time demand plus safety stock). Because of this separation, the correct statement is that EOQ determines order quantity while reorder level determines when to order. The order quantity from EOQ is not about timing, and the reorder level is not about how much you order. The other options mix up these roles or claim they are the same.