In the production lot size model:
A)the maximum inventory position, M, equals Q*.
B)additions to, and withdrawals from, inventory occur at equal rates.
C)at Q*, annual production setup costs equal annual holding costs.
D)at Q*, annual production setup costs exceed annual holding costs.

Question

Quizplus · Accepted Answer

In the production lot size model, the maximum inventory position, M, equals Q* and at Q*, the annual production setup costs equal annual holding costs. This is the optimal solution that minimizes the total cost of inventory.

In the Production Lot Size Model