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Hi sir,
I am trying to remember a question I saw.What if the question gave you the EOQ and asked to find the total annual cost/purchase cost?
We sell 25,000 units each time and demand is the same throughout the year. The ordering cost is $20. The holding cost is $4. The EOQ is 500. There is $12 for something. I don’t remember.
Have you not watched my free lectures because I work through an example calculating the total annual cost!!!
You cannot have remembered the question correctly because if they sell 25,000 units each time then there is no way the the EOQ will have been 500 units!! I would imagine that the 25,000 is the total purchases during the year.
The total purchase cost is the purchases multiplied by the unit cost.
The annual holding cost is the average inventory (250 units) multiplied by the holding cost per unit.
The annual ordering cost is the number of orders (50) multiplied by the ordering cost each time.
I do suggest that you watch my free lectures. They are a complete free course for Paper MA and cover everything needed to be able to pass the exam well.
You don’t need to be shouting sir!!! I just simple asked a question.
Thank you!!!!
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