CLEP Principles of Management Exam Prep

Answer: A - By reducing machine set up time, you will reduce the overall cost of manufacturing that part as well as the cost of each lot. As the cost of each lot is reduced, the lot size can also reduce.

Key Takeaway: The Economic Order Quantity (EOQ) method of determining lot size for kanban systems takes into account the machine set up time for each lot and the processing time for each part within that lot. Since the machine set up time is a cost which is spread out over the cost of each individual part within that lot, the more you reduce machine set up time, the more you can reduce overall lot size without impacting the cost of the part.