For a given level of annual demand (D), as lot sizes (Q) increase there is a trade off between higher holding costs and lower ordering or setup costs.

Name: For a given level of annual demand (D), as lot sizes (Q) increase there is a trade off between higher holding costs and lower ordering or setup costs.
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Question

Quizplus · Accepted Answer

As lot sizes increase, holding costs rise due to more inventory being stored, while ordering or setup costs decrease because fewer orders or setups are needed.

For a Given Level of Annual Demand (D), as Lot