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John Moffat says
May 21, 2015 at 10:20 am
To calculate the holding cost of inventory over a year.
Order quantity/2 is the average inventory throughout the year, ignoring any buffer inventory (which is what is usually the case in the exam). If there is buffer inventory, then the average inventory is higher by that amount throughout the year.
May 21, 2015 at 10:42 am
thank you very much sir.
May 20, 2015 at 2:01 pm
please help me on the following questions.
1.what is the difference between buffer inventory and safety inventory?
2.what is the formula for finding average inventory?
May 20, 2015 at 5:51 pm
1. Buffer inventory and safety inventory and different words for the same thing (buffer = safety)
2. The average inventory is (order quantity/2) plus any safety/buffer inventory.
May 21, 2015 at 8:02 am
thank you sir.
one more question please
when is this formula used? ‘(buffer inventory + order quantity/2)*holding cost per unit’.
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