Case Interview Prep

Answer: D - The economic order quantity (EOQ) method should be used for determining lot size in the kanban method.

Key Takeaway: The economic order quantity (EOQ) is determined by factoring in the machine set up costs as well as the cost of operating the production equipment. These costs are then optimized by determining the lot size that justifies the machine set up cost. For example, a process with a low machine set up cost would have a smaller lot size since it is easy and inexpensive to change to that production. However, a process with a higher machine set up cost would often result in larger lot sizes.