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The simple economic order quantity (EOQ) model shows how much to order (i.e., lot size) in...

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General Management

The simple economic order quantity (EOQ) model shows how much toorder (i.e., lot size) in terms of holding costs, setup (ordering)costs, and total inventory cost.  In terms of this model,why is it necessary to reduce setup cost if we desire smaller lotsizes? Draw the inventory cost curves diagram and fullyexplain.

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Total inventory cost is the sum of two costs holding cost andordering cost If we order large quantitites more units will haveto be stored per cycle and total cost    See Answer
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