Consider the relationship between optimal lot size and set-up cost. Other things remaining the same, as the setup cost decreases,
A) holding cost will increase.
B) optimal production batch size will increase.
C) optimal production batch size will decrease.
D) optimal production batch size will stay the same.

Question

Quizplus · Accepted Answer

The optimal production batch size decreases as setup cost decreases because lower setup costs make smaller production runs more economically viable, reducing the need to produce in larger batches to amortize the setup costs over more units.

Consider the Relationship Between Optimal Lot Size and Set-Up Cost