In Belk Co.’s just-in-time production system, costs per setup were reduced from $28 to $2. In the process of reducing inventory levels, Belk found that there were fixed facility and administrative costs that previously had not been included in the carrying cost calculation. The result was an increase from $8 to $32 per unit per year. What were the effects of these changes on Belk’s economic lot size and relevant costs?
Lot Size... Relevant Costs