ECONOMICS

Detailed explanation-1: -When the size of the order increases, the ordering costs (cost of purchasing, inspection, etc.) will decrease whereas the inventory carrying costs (costs of storage, insurance, etc.) will increase. Economic Order Quantity (EOQ) is that size of order which minimizes total annual costs of carrying and cost of ordering.

Detailed explanation-2: -Larger order sizes minimize purchasing costs. So as order sizes increase, purchasing costs go down. However, larger orders increase inventory levels. And as inventory increases, carrying costs go up.

Detailed explanation-3: -If the number of order placed is large, the higher will be the ordering cost. But if the firm purchases in large quantities by each order, the number of orders will decrease and therefore, the total ordering cost will be smaller.

Detailed explanation-4: -The total amount of ordering costs that a business incurs will increase with the number of orders placed.