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Practice Test EOQ written question (EOQ fall/increase)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Practice Test EOQ written question (EOQ fall/increase)

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
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  • May 13, 2017 at 7:14 am #386055
    rustamrakhmatov27
    Member
    • Topics: 156
    • Replies: 127
    • ☆☆☆

    Hello sir:) I hope you are well.

    So in Practice test of Chapter 4, Question 3, i found the question.

    Whats gonna happen with EOQ and Total holding costs if there is a decrease in cost of ordering a batch.

    So, if we are working with formula it is ok I understand as explained in the answer.

    But how can we work with the graph looking like X. ( Y= Total Inventory Cost, X – quantity ordered)

    So if we move down (from the intersection point) along the line of ORDERING COST, so the gradient of HOLDING COST will decline, so cost of holding decreases.

    But when the Cost of holding decreases with a Cost of ordering decrease, EOQ will increase on the graph cause the INTERSECTION moved to the right no???

    May 13, 2017 at 9:27 pm #386116
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54805
    • ☆☆☆☆☆

    The EOQ depends on the total of the two costs.

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  • The topic ‘Practice Test EOQ written question (EOQ fall/increase)’ is closed to new replies.

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