Principles of Management CLEP Practice Exam 2025 – Your Comprehensive All-in-One Guide to Exam Success!

The primary goal of Economic Order Quantity (EOQ) in inventory management is to determine the optimal order quantity that a company should purchase in order to minimize the total costs associated with inventory. These costs encompass various factors, including holding costs, ordering costs, and stockout costs.

Focusing on minimizing machine setup and operating costs aligns with the overall intent of EOQ, which seeks to reduce the expenses tied to inventory management. By calculating the EOQ, businesses can establish a balance between the costs incurred from placing orders (ordering costs) and the costs associated with storing inventory (holding costs). This helps mitigate the expenses related to frequent orders and excess inventory, allowing for more efficient use of resources.

While maximizing employee efficiency, enhancing customer satisfaction, and reducing wastage in production are important goals in management, they are secondary to the specific aim of EOQ, which is centered on optimizing inventory costs.