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December 5, 2018 at 2:30 am
I have not understood holding costs calculation. Actually how do we get the answer in the open tuition example video clip?
John Moffat says
December 5, 2018 at 6:16 am
It is 10% of the cost per unit (as stated in the question) multiplied by the average inventory.
Have you downloaded the free lecture notes that go with the lectures?
July 4, 2018 at 5:09 pm
Do we have to ignore the purchase cost in our exam answer too when it asks to calculate total inventory cost? Refered to example 2 of lecture notes.
July 5, 2018 at 6:42 am
Unless there are quantity discounts, the purchase cost is not relevant to the decision. As far as calculating the total inventory cost is concerned, the question will make it clear whether or not the total purchase cost is to be included.
March 27, 2018 at 12:04 am
While I understand that the EOQ will be lower if the cost of ordering a new batch of material falls, can you please explain why the annual holding cost is lower also?
March 27, 2018 at 7:31 am
If the EQO is lower, then the average inventory will be lower (it is always half the order quantity) and therefore the annual holding cost will be lower.
August 23, 2017 at 6:27 pm
I was wondering if we’ll be provided with these formulas in the exam
August 24, 2017 at 6:14 am
The formulae sheet that you are given in the exam is printed at the beginning of our free lecture notes.
March 30, 2017 at 4:13 am
extravagent lecture (y)
February 12, 2017 at 7:43 am
Sir, why is it everytime when we calculate Inventory holding we take the average of Inventory. Like suppose if my annual demand is 10,000 and I am planning to purchase by 1000 units. So when I calculate my holding cost why should I take the average of 1000units??? Instead why can’t I just take 1000 units? Thankyou.
February 12, 2017 at 4:01 pm
Because the level of inventory keep fluctuating between 1,000 (when you have just received a delivery) and 0 (just before the next delivery arrives).
May 16, 2017 at 8:15 pm
is it because the inventory is at either 500 or zero that means there is only 2 steps so 500/2 is 250. if not is there an additional lecture i can watch to understand more
May 17, 2017 at 7:34 am
No. As I wrote in my previous reply, if they order 1,000 units each time then the inventory level keeps moving between 1,000 and zero. So the average inventory through the year is 1000/2 = 500 units.
This is explained in the lecture.
December 23, 2016 at 7:25 pm
Is there a video explaining these please? Thanks
FIFO, LIFO, and Weighted average
December 23, 2016 at 10:16 pm
This is the new chapter I referred to in my other reply.
Lectures will be uploaded in early January 🙂
December 23, 2016 at 7:16 pm
I think these videos are for chapter 6 right? and not chapter 5 as per your notes
December 23, 2016 at 10:15 pm
Sorry – what has happened is that the notes have been updated with a new chapter. That has made the numbers of the lectures wrong.
New lectures will be uploaded in early January (although the existing ones are all still fine).
December 27, 2016 at 9:53 am
Ok Mr.Moffat thanks for your reply. I will do just the notes for now and when the lectures are updated I will go through them again.
Thanks a lot
December 27, 2016 at 2:04 pm
You are welcome 🙂
November 19, 2016 at 2:28 pm
Sir, in example 1, could I ask why the cost per unit is $25? (when calculating stockholding cost) How could I calculate $25?
November 19, 2016 at 5:40 pm
The question says that the cost is $25 !!!!
(Have you not downloaded the free lecture notes? There is no point at all in watching the lectures if you have not downloaded the notes.)
November 20, 2016 at 12:08 pm
Thank you for your reply. $25 is the purchase price and is it the cost per unit, then?
“Janis has demand for 40,000 desks p.a. and the purchase price of each desk is $25. There are ordering costs of $20 for each order placed. Inventory holding costs amount to 10% p.a. of inventory value.”
November 20, 2016 at 3:28 pm
Yes – the cost of the units is the price that they pay for the units.
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