Question

The least total cost method (LTC) lot-sizing technique calculates the order quantity by comparing the carrying cost and the setup (or ordering) costs for various lot sizes and then selects the lot in which these are most nearly equal. Group of answer choices True False

Answer 1

Answer:

True

Step-by-step explanation:

The least total cost method is the method in which the total cost of the ordering cost and the total carrying cost is equal among various lot size available.

The order quantity should be choose when the total ordering cost and the total carrying cost equal to each other

The formula to compute the economic order quantity is shown below:

a. The computation of the economic order quantity is shown below:

$= \sqrt{\frac{2\times \text{Annual demand}\times \text{Ordering cost}}{\text{Carrying cost}}}$

It is always be expressed in units

The formula to compute the ordering cost is

$= \frac{Annual\ demand}{Economic\ order\ quantity}\times ordering\ cost\ per\ order$

And, the formula to compute the carrying cost is

$= \frac{Economic\ order\ quanity}{2}\times carrying\ cost\ per\ unit$

Hence, the given statement is true