Not an EOQ assumption?

• A. Demand is constant
• B. Ordering cost is fixed
• C. Holding cost is fixed per unit
• D. Stockouts are allowed and backorders are accepted

Answer: (D)

In the traditional EOQ framework, the goal is to minimize total annual cost by balancing fixed ordering costs with holding costs under a steady, known demand. The model assumes demand arrives at a constant rate, allowing you to plan purchases of fixed size, with a fixed lead time and a constant price per unit. A crucial point is that stockouts are not allowed in the simplest EOQ version; the system is designed to keep inventory above zero so you don’t face backorder costs. If stockouts or backorders were allowed, you’d be using a variant of the model (EOQ with shortages), which changes the calculations and the optimal order quantity.

The other conditions—constant demand, fixed ordering cost, and holding cost proportional to unit inventory—fit squarely with the classic EOQ assumptions.