If setup costs are essentially zero (negligible when compared to carrying costs), which approach should be used for lot sizing?
A) lot for lot
B) fixed order quantity
C) period order quantity with POQ = 6 periods
D) period order quantity with POQ = 2 periods
E) period order quantity with POQ = 4 periods

Question

Quizplus · Accepted Answer

When setup costs are negligible compared to carrying costs, the lot-for-lot approach is most efficient. This method orders exactly what is needed for the next period, minimizing carrying costs by not holding excess inventory.

If Setup Costs Are Essentially Zero (Negligible When Compared to Carrying