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

The Economic Order Quantity (EOQ) model operates under specific assumptions that simplify inventory management and help in reducing total inventory costs, which include ordering and carrying costs. One of the key assumptions of the EOQ model is that ordering and carrying costs are independent. This means that the total cost of managing inventory can be separately analyzed by factoring in these two types of costs without them influencing each other.

The other assumptions are integral to the EOQ model. Constant known demand implies that the demand for the product remains steady over time, allowing for predictable inventory levels. The assumption that the cost per unit does not vary with the order quantity means that bulk purchases do not provide discounts or changes in price, which is another foundational aspect of the model. Finally, the assumption that the entire order is delivered at once allows for simpler calculations regarding inventory replenishment and carrying costs.

Identifying the incorrect assumption, which states that ordering and carrying costs are dependent, is crucial as it highlights a misunderstanding of how the EOQ model simplifies the analysis of inventory costs. This reflection on the independence of these costs enables businesses to optimize their ordering strategy and balance their inventory effectively.