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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Ordering Costs
BC Co. sells widgets and expects annual demand of 3.4m units. The cost of making
an order is $49.71 and the cost of holding one unit for one year is $0.50.
What is the total ordering costs per year
The solution(explanation) was not given since it was an MCQ. The answer however is $6,500.54. How did they arrive at this answer? Please help
You need to calculate the EOQ using the formula on the formula sheet, and this comes to 26,000 units.
Therefore they will need to place 3.4M/26,000 = 130.77 orders a year on average.
Therefore the total ordering costs = 130.77 x 49.71 = $6,500 p.a.
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