The GATE Grind

GATE 2026 PI – Question 23

Operations Research and Operations Management · Production Control · 1 mark · Multiple choice

Which is NOT an assumption of the economic order quantity (EOQ) model?

  1. Demand is known and deterministic.
  2. Lead time is zero.
  3. Stockouts are permissible.
  4. Holding cost for stock increases linearly with order quantity.

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Show answer and explanation

Correct answer: (C) Stockouts are permissible.

Explanation

The basic EOQ model balances ordering and holding costs with known steady demand and replenishment without shortages. It does not allow stockouts, so **C** is the intended answer. Zero lead time is a common simplification; the model also admits known constant positive lead time through a reorder point.

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