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how the inverse relationship between order size and order cost
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Eg. Everytime you place an order (any quantity, 1 unit or 1000 units) there is a cost of RS. 50 per order.
If your annual requirement is, say, 12 units, you have 2 choices
1. Order 1 unit at a time, i.e. ordering cost 12orders x50=600
2. Order 6 units at once, i.e. 2 orders x 50 = 100
So bigger the order size, lesser the ordering cost.
If your annual requirement is, say, 12 units, you have 2 choices
1. Order 1 unit at a time, i.e. ordering cost 12orders x50=600
2. Order 6 units at once, i.e. 2 orders x 50 = 100
So bigger the order size, lesser the ordering cost.
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