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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