Least Unit Cost Procedure Optimum Lot-Sizing Procedures

Starting from the shortage date, successive requirements are grouped together to form lots until total costs per unit reach a minimum level. The total costs are equal to the sum of the lot size independent costs plus the total storage costs.

The following figures are used in the example:

Price:$20

Lot size independent rcosts: $100

Storage costs percentage: 10%

In the example of the least unit cost procedure above, the minimum cost per unit is achieved with a lot size of 2000 pieces.

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