Which stock level determines the lowest total variable costs to order and hold inventory?

The Economic Order Quantity (EOQ) is the stock level that minimizes the total variable costs associated with ordering and holding inventory. This concept is fundamental in inventory management and seeks to identify the optimal order quantity that reduces overall costs.

The EOQ formula takes into account the various costs of inventory, including order costs (the costs associated with placing an order) and holding costs (the costs associated with storing unsold goods). By deriving the EOQ, organizations can determine the most cost-effective number of units to order, balancing the trade-off between ordering frequency and the cost of holding inventory.

Effective management of inventory using EOQ leads to a more efficient supply chain, as it helps prevent overstocking and stockouts, thereby reducing operational inefficiencies and unnecessary expenses. This concept is particularly important for businesses aiming to optimize their supply chain management and reduce overall costs.

The other options relate to inventory management but do not specifically focus on minimizing total variable costs in the same way.