Consider the inventory model for Economic Order Quantity (EOQ). You are asked to elucidate the cost drivers in a simple lot sizing problem, for example, batch orders in production or transportation.

Let the optimal amount of inventory quantity determined by the model to be Q* = 2*A*D*h , where A is the ordering cost, D is the total period demand, is the item value and h is the inventory holding cost factor. Is it true or false to say that "the optimal quantity increases as the cost of placing each order increases, but decreases as the item's value increases"?

Choices:

TRUE

FALSE

I DONT KNOW