Certified Maintenance & Reliability Professional (CMRP) Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Certified Maintenance and Reliability Professional Test with flashcards and multiple-choice questions. Understand the exam structure, practice with explanations and hints, and get ready for certification success!

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

What is the purpose of EOQ (Economic Order Quantity) in inventory management?

To improve inventory turn ratio
To calculate the optimum order quantity
To increase inventory costs
To minimize order frequency

The correct answer is: To calculate the optimum order quantity

The purpose of Economic Order Quantity (EOQ) in inventory management is to calculate the optimum order quantity that minimizes the total cost associated with inventory. This includes considerations of ordering costs and holding costs. By identifying the optimal quantity to order, businesses can reduce the costs of having too much inventory (which incurs holding costs) while also minimizing the costs related to placing frequent orders (which incurs ordering costs). This balance is crucial for maintaining efficient operations and ensuring that capital is utilized effectively. By applying the EOQ formula, organizations can streamline their inventory management processes, reduce waste, and enhance overall profitability through more informed purchasing decisions. The focus of EOQ is not on increasing inventory costs or merely improving the inventory turn ratio without regard for costs; rather, its primary goal is to find the most cost-effective amount to order, thereby supporting better financial health and operational efficiency.