Which of the following is a key component in calculating the Economic Order Quantity (EOQ)?

The Economic Order Quantity (EOQ) is a fundamental formula used in inventory management to determine the optimal order quantity that minimizes total inventory costs, which include ordering and holding costs. A key component in calculating EOQ is establishing a correlation between annual demand and order cost.

Annual demand refers to the total quantity of inventory required over a year, while order cost is the cost incurred every time an order is placed. The EOQ formula incorporates these two factors to find the most economically viable quantity to order at a time, ensuring that inventory levels are sufficient to meet demand while minimizing the costs associated with ordering more frequently.

In contrast, annual demand and sales price would focus on market dynamics rather than order quantity decisions. Total liabilities and equity, as well as total revenue and expenses, address different financial aspects unrelated to inventory management and order calculations. Therefore, emphasizing the relationship between annual demand and order cost directly aligns with the purpose of the EOQ evaluation, making it the correct choice in this context.