The total sum of the carrying costs and the shortage costs will be lowest at the point where

Question

Quizplus · Accepted Answer

At the point where the carrying costs equal the shortage costs, the total sum of both costs will be at its lowest point. This is because any increase in carrying costs beyond this point or decrease in shortage costs will result in an increase in the total cost, and vice versa. Therefore, minimizing both costs to equal each other will lead to the lowest total cost.

The Total Sum of the Carrying Costs and the Shortage