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    • The purchase cost is not an actual inventory cost – the same amount is payable over the year regardless of the amount of inventory held.
      It is only relevant in the case of quantity discounts which are explained later in the lectures.

  4. Hi

    I’d just like to thank the lecturer for all these lectures. You simplify it, make it understandable.
    Keep up the good work I have my exam in a coupe of weeks for the F2.
    Anita

    • Unless there are quantity discounts (which is discussed in the following lecture) then the total purchase price over the year is the same whatever the order quantity, so it is not relevant to the decision as to how many to order each time.

      • I understand your principles but all the questions I’ve seen in the BPP revision kit relating to inventory cost kept multiplying the purchase price per unit by the annual demand when there are no discounts.

        This is wrong, right? By your explanation, it’s more like an error of double counting.

      • It is not double counting!
        If there are no discounts then the total purchase cost over the year will be the same for any order quantity and unless the question specifies differently, it makes no difference to the EOQ whether you add in the purchase price or not.

  9. May God’s peace and blessings be upone you, you are doing a great job helping people, I thank you for that. And the question I wanted to ask is that:

    Aren’t we considering bulk discounts here?? If we buy 40,000 desks at the start of the year, our holding cost does get higher but what if the discount we are getting nullifies the higher holding cost.

  11. John, I’m having a few questions.. But first I wanna say I’m enjoying my study here at open tuition… Well, I watched all the 6 videos on Inventory Control.. and was able to answer the unsolved questions of the course note myself.. but when I moved on to study Bpp I found a lot of new formula there, e.g how to calculate buffer/minimum inventory. I saw u replied here that there is no rule to calculate it, But Bpp states ‘Buffer inventory= Reorder level-(average usage multiplied by average lead time)’
    I checked into ACCA webpage to access the syllabus. there I found the following:
    “”‘(iv) Identify, explain and calculate the costs of
    ordering and holding inventory (including
    buffer inventory)[s] “””

    And also, the calculation of average inventory using the safety inventory and reorder quantity is nowhere discussed in all six videos.. So, would u please explain what to study and how? I’m getting all confused. I really wanna get above 80% at any cost and willing to study all day if that takes, so give me some suggestion on how to approach it, I will sit for my f2 exam on this december….Thanks..!!

    • Our Lectures and Lecture Notes are what we teach on the ‘teaching’ phase of the course where our job is to make sure everyone will get more than 50% and therefore pass the exam. Obviously many get much higher marks, but our focus in on making sure people pass.

      Certainly buffer/safety inventories and reorder levels are in the syllabus, but there are only ever very few (if any questions) on that – most of the inventory questions are on what we cover in the lectures.

      However, we also have revision notes (which are again what we use on our courses where we have a few days of quick revision). In those notes you will find quick examples on what is in the main lecture notes and also things like buffer inventory and reorder levels.

      Our Lecture Notes are not meant to replace Study Texts. However, if you work through all of our lectures notes with the lectures, if you work through the revision notes, and if you attempt our mock exam (and every time you attempt it you are likely to get different questions, because the computer chooses them at random from a large bank of questions), then you should pass easily. To be extra certain you should have a Revision Kit from one of the ACCA approved publishers because they contain lots of exam standard questions to practice on, and practice is the most vital thing of all.

  13. Hi John
    Just started work into this paper today in readiness for the Dec 15 sitting (in conjunction with F6 which I finished the OT course on at lunch today). Just want to say what a comfort it is to have you lecturing this. My stomach turned when I looked at the syllabus but seeing you appear on these lectures is a saving grace. I felt the same way on the F5 paper and with you support and BPP distance learning managed 89% on that paper. Based on this lecture alone it’s a real confidence booster to have a tutor make you “understand” rather than merely “learn”. Apologies for the hyperbole but I will sleep a lot easier tonight knowing you’re running the course – my wife will be much happier too as stress levels decrease considerably which in turn makes it easier for her to live with me for the next 5 months!

    Thanks so much once again – I’m sure I speak on behalf of ALL students in our sincere gratitude for your time and effort. OT should be put forward for any and all awards for what you achieve and the time you give up without financial reward.

    Kind Regards

    Chris

  15. Sir,
    Does the cost of the inventory itself (in this case $25/unit) not matter? The question is about calculating the cost of Inventory p.a (which I think includes the purchase price of the inventory)

    Also if we used that, would it distort the EOQ?

    • The cost of the inventory of $25 if not relevant because it would be the same total cost over the year however many we order each time. We are still ordering the same total number of units over the year, and so the total purchase price will be the same. We are costing out over the year and only the total order and total inventory costs will change with the number ordered each time.

      The purchase price is only relevant if the holding cost per unit is a % of the purchase price (but only relevant for calculating the holding cost per unit), or if there are discount offered for purchasing larger quantities each time (which is dealt with in the later lectures.)

  19. Thx for lectures,John.
    but I have a small question,I bought a latest text book published by BPP,and I planned to look though each chapter of the book after watching lectures ,but the contents of your lectures are quiet different from the book,which makes me confused %>_<%

    • The chapters may be in a different order, but the contents are not quite different! Our lectures go through most of what is needed for the exam.
      If you understand our lectures you do not really need to use the Study Text, but what you must have is a Revisiom Kit because it is vital to practice as many questions as possible.

      • sorry I didn’t express myself properly, I do wanna say the order is different…
        But it’s good to know that I don’t have to go through the whole textbook coz it’s too much in the book!
        THX AGAIN!^_^

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