Question

The lot-for-lot (LFL) rule is best applied when: a. inventory-carrying costs are high. b. space constraints are low. c. costs associated with purchase orders are high. d. setup costs are moderate.

Answer 1

The lot-for-lot (LFL) rule is best applied when inventory-carrying costs are high.

Option A

Explanation:

LFL is Lot for Lot and the lot sizing process, where the system considers the order quantity the net specifications for each period. The approach is intermittently appropriate for expensive things or objects.

The bigger the size of the lot, the higher the overall inventory level and the greater the cost of the inventory. However, the expense of the ordering system is smaller since many items are designated to transport and logistics.

The smaller the lot size, the lower the average inventory level. Instead, the purchasing costs of a unit increase. The size of a batch is the most economical when the overall cost of ordering and inventory transport is minimal.