Analogously to item \(1(c)\) above, what might inventory carrying cost in the \(\mathrm{EOQ}\) model serve as a surrogate for in the real system? With this in mind, comment on the suggestion (once fairly common in textbooks) that "a charge of 10 percent on stock is a fair one to cover both interest and depreciation." What is another name for this "charge"?

Additionally, explain the statement "A charge of 10 percent on stock is a fair one to cover both interest and depreciation" and provide an alternative name for this "charge." Answer: The inventory carrying cost in the EOQ model represents the expenses of holding and storing a company's inventory over a certain period of time, including storage fees, insurance costs, spoilage costs, depreciation charges, and opportunity cost of the invested capital. In a real system, it can serve as a surrogate for stockholding costs and their impact on the overall business profitability. The statement "A charge of 10 percent on stock is a fair one to cover both interest and depreciation" suggests that a 10 percent charge on inventory value is an appropriate proxy for all inventory holding expenses, including interest (opportunity cost of capital) and depreciation (for perishable goods). However, this may vary depending on the business type, market conditions, and the company's specific situation. An alternative name for this "charge" is the "carrying cost rate" or "inventory holding cost rate," signifying the percentage of inventory value consumed as carrying cost over a specific time period (usually one year).