The cost of placing an order for inventory will impact the optimal level of inventory to hold. If it is expensive to place an order, the company will make fewer orders, but for more units each time. This will increase the level of inventory that they will hold in order to minimize all costs associated with inventory.
The rate of usage of inventory will directly impact the level of inventory that should be held.
The cost per unit of inventory will directly impact the level of inventory that should be held. If the inventory is cheap, there is less opportunity cost from holding the inventory.
The current level of inventory held by the company does not influence what the optimal level of inventory should be.
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