Lot-for-lot (LFL):
A) minimizes purchase or setup costs.
B) maximizes the amount of inventory that need to be carried.
C) ignores the cost associated with purchase orders.
D) masks the true nature of dependent demand.

Question

Quizplus · Accepted Answer

Lot-for-lot (LFL) ignores the cost associated with purchase orders, aiming to order exactly what is needed to fulfill demand in each period, with no consideration for economies of scale. It may not be the best choice for minimizing overall inventory and related costs, but it can be useful in situations where demand is uncertain or variable, and carrying excess inventory is not desirable. LFL also does not mask the true nature of dependent demand, as each period's order is based directly on the dependent demand requirements for that period.

Lot-For-Lot (LFL)