The Least Unit Cost Method of Lot-Sizing Adds Ordering, Stock-Out

question 66

True/False

The least unit cost method of lot-sizing adds ordering, stock-out and inventory carrying cost for each trial lot size and divides by the number of units in each lot size, picking the lot size with the lowest unit cost.

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Definitions:

Contribution Margin Ratio

A financial metric that shows the percentage of sales revenue that is not consumed by variable costs and contributes to covering fixed costs.

Fixed Expenses

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance.

Residual Income

The amount of income that exceeds the minimum rate of return on a project or investment.

Required Rate Of Return

The minimum percentage return an investor expects to achieve from an investment to make it worthwhile, considering the risk.