I don’t know what you mean by a ‘review answer’. I work through the example in the lecture, and there is obviously a printed answer in the lecture notes as well.

mcasasays

Hi John,

Thank you for the lecture!

Just a quick question:

When we order 5000 units, we get 1% discount, therefore pay 99% of the Β£25. When we order 10000, shouldn’t it be 2% discount, not 1.5%, therefore its 98% of the Β£25, not 98.5%?

Why on earth should the % given as discount double just because they order more? They do not have to increase the % at all – they could just leave it at 1% for all quantities over 5,000.

Here, the question says that they offer a 1.5% discount for quantities over 20,000.

I have an issue with Chapter 5, example 3. The question states the βdiscounts on purchase priceβ. It does not state however that there would be a discount on the cost of inventory holding. Later, when I compared my answer to the example answer, it shows the inventory holding as well as the purchase cost calculated at 99%, reflecting the discount on both.

Please let me know what is correct, as there is no logical indicator to flag the deduction on inventory holding within the equation.

Hello. Thank you so much, I love your lectures. You make things logical and easy to understand. I was going through my previous notes and realized we did not cover buffer and maximum level of inventories calculations in the inventory chapter. Is it because it is covered in F2? (its been a while since I studied F2) Many Thanks for changing our lives for better.

Please forgive me but Looking at the answer for Example 3, I would like to know why it has $25 instead of $20 to a purchase cost, could you please explain as I am mixing it up.

I know I am not Mr. Moffat, but if you look back at Example 1, $20 was the ordering cost whereas $25 is the purchase price of each desk. Now in Example 3, it is stated that “the supplier now offers us discounts on purchase price as follows”.

I am a student, so thank you for highlighting the importance of reading the question.

hello sir..these lectures are very helpful as i am sitting for my exam on 7 December. i have a question. In the bpp book it talks about minimum quantity , maximum quantity, lead time..buffer…its not part of the lecture and i’m worried it will be in the exam as i dont understand it

If you mean the lecture, then no – lectures cannot be downloaded. They can only be watched online. It is the only way that we can keep this website free of charge.

I can only imagine that it was an advert. We do not offer OpenTuition audiobooks.

cannzsays

I find the lectures very helpful.I am confuse about the purchase and order cost both are buying then why cost is different?please help me out .thank you

John, Chapter 5, Test Q 4 = Answer says C, however I cannot get to this figure

2 x 9,000 x 40 Divded by (8% of 40) 3.2 sqrt = 464 + 160 (being charge for placing the order) obviously does not come to 949 please could you advice and apologies i fear i should know this… thank you sam

Thank you for the lectures. When i was doing a few examples from kaplan study text, I noticed that the the discount was not applied when calculating the holding cost, it was only applied on the purchase cost. So I am a bit confused whether to apply the discount whilst calculating holding cost. Please clarify? Thanks

It depends how the holding cost is given. If it is given as a $ amount per unit (e.g. holding cost is $2 per unit), then it stays at that amount even if there is a discount on the purchase price. If the holding cost is given as a % of the purchase price, then as the discount reduces the purchase price it also reduces the holding cost.

If there is no discount, then if you are buying 40,000 a year at a cost of $25, then the total purchase price is $1,000,000.

If there is a discount of 1% then the total purchase price is $1M less 1% (or $1M x 99%).

Also, the total order cost is not $160 a year!! If they are ordering 40,000 a year with an order quantity of 800, then they are placing 40,000/800 = 50 orders a year.

I do suggest that you watch the lecture again because you seem to be confusing all of the figures. The answer and the approach in the lecture is correct!

Hi Mr John, Can you give me some advice on the following? QUESTION : A company uses an items of inventory as follows : Purchase price: $ 25 per unit Annual demand : 1800 units Ordering cost : $ 32 Annual holding cost : $ 4.5 per unit EOQ: 160 units What is the minimum total cost assuming a discount of 2% given on orders of 300 and over? ( This is the question 6.19 from BPP revision kit)

My answer is : TC= OC+ HC + Cost of inventory =D/Q * Co + Q/2 * Ch + D* purchase price = 1800/300 * 32 + 300/2 * 4.5 + 1800 * 25 *0.98 = 44,967$ But their answer is 44,953.5 because there is a little different with my answer. They change total holding cost at a discount 2% . I donβt know why? In the comment lecture you said β It depends how the holding cost is given. If it is given as a $ amount per unit (e.g. holding cost is $2 per unit), then it stays at that amount even if there is a discount on the purchase price. If the holding cost is given as a % of the purchase price, then as the discount reduces the purchase price it also reduces the holding cost. β

John, in the exam. at minute 25:00. The holding cost price after discount is 2.4625. Do we have to put it into 4 decimal places or 3? or if there more decimal places, do we have to put all of the numbers?

kaseem1 says

HOW do u know that when to use 99% and when to use 10% cuze sometimes i don,t get it

kaseem1 says

Oh damn i got it after Replaying again an again Thanks but a review answer would be better

John Moffat says

I don’t know what you mean by a ‘review answer’. I work through the example in the lecture, and there is obviously a printed answer in the lecture notes as well.

mcasa says

Hi John,

Thank you for the lecture!

Just a quick question:

When we order 5000 units, we get 1% discount, therefore pay 99% of the Β£25. When we order 10000, shouldn’t it be 2% discount, not 1.5%, therefore its 98% of the Β£25, not 98.5%?

Thank you very much!

John Moffat says

Why on earth should the % given as discount double just because they order more? They do not have to increase the % at all – they could just leave it at 1% for all quantities over 5,000.

Here, the question says that they offer a 1.5% discount for quantities over 20,000.

loukasierides says

excellent lecture thank you

John Moffat says

Thank you for your comment π

caolanfinegan says

I have an issue with Chapter 5, example 3. The question states the βdiscounts on purchase priceβ. It does not state however that there would be a discount on the cost of inventory holding. Later, when I compared my answer to the example answer, it shows the inventory holding as well as the purchase cost calculated at 99%, reflecting the discount on both.

Please let me know what is correct, as there is no logical indicator to flag the deduction on inventory holding within the equation.

Thanks,

caolanfinegan says

Holding price of 2.5 is calced as a % (10) of the unit cost. Thus, a lower unit cost would result in a lower holding cost. No need to explain. Thanks.

John Moffat says

Correct π

glaserrose says

sir the way you explained this lecture is excellent very easy to understand thank you .

John Moffat says

Thank you for the comment π

christina14 says

Hello Thank you very much Inventory control seem very clear and logical now. Again Thank you

aigreen says

Never mind. Not 0 to 5000, but 0 to < 5000.

aigreen says

Why 5000 and not 5001?

Jamie says

Really enjoy your lecture, better than my college teacher for F5 and F7. Looking forward to learning the whole F9 lecture. Thank you very much john!!!

John Moffat says

Thank you for the comment π

madihaf92 says

Hello. Thank you so much, I love your lectures. You make things logical and easy to understand. I was going through my previous notes and realized we did not cover buffer and maximum level of inventories calculations in the inventory chapter. Is it because it is covered in F2? (its been a while since I studied F2)

Many Thanks for changing our lives for better.

suzzgold says

Hi Sir,

Please forgive me but Looking at the answer for Example 3, I would like to know why it has $25 instead of $20 to a purchase cost, could you please explain as I am mixing it up.

Thanks

shuv27 says

Hi Susan

I know I am not Mr. Moffat, but if you look back at Example 1, $20 was the ordering cost whereas $25 is the purchase price of each desk. Now in Example 3, it is stated that “the supplier now offers us discounts on purchase price as follows”.

I am a student, so thank you for highlighting the importance of reading the question.

I hope I have been of help.

salman says

tz is just awesome?

John Moffat says

Thank you π

simranflora85 says

hello sir..these lectures are very helpful as i am sitting for my exam on 7 December. i have a question. In the bpp book it talks about minimum quantity , maximum quantity, lead time..buffer…its not part of the lecture and i’m worried it will be in the exam as i dont understand it

John Moffat says

They are less important, but are covered in the F2 Revision Lectures.

simranflora85 says

thank you so much

so are they likely to come in the exams?

John Moffat says

Possibly, but not as likely as EOQ calculations.

simranflora85 says

okay.. thank you so much sir π

John Moffat says

You are welcome π

kazilala says

Ive been trying to download the Audiobook without success.Is there another way I could download it online?

John Moffat says

If you mean the lecture, then no – lectures cannot be downloaded. They can only be watched online. It is the only way that we can keep this website free of charge.

kazilala says

No theres an option on the page advertising the use of an Audiobook

John Moffat says

I can only imagine that it was an advert.

We do not offer OpenTuition audiobooks.

cannz says

I find the lectures very helpful.I am confuse about the purchase and order cost both are buying then why cost is different?please help me out .thank you

John Moffat says

Purchase cost is the amount being charged for the goods themselves.

Order cost is the cost of actually making the order (for example, the cost of delivery; the cost of the paperwork involved in placing an order).

cannz says

thank you for making me clear about my confusion

aliimranacca007 says

Sir you told that discount also effect on holding cost but bpp kit Q 29 zps co discount only effect on purchase cost ..

John Moffat says

If you are certain that is the case (because I do not have the BPP book) then they have made a mistake.

Sam says

John,

Chapter 5, Test Q 4 = Answer says C, however I cannot get to this figure

2 x 9,000 x 40

Divded by (8% of 40) 3.2

sqrt = 464 + 160 (being charge for placing the order)

obviously does not come to 949

please could you advice and apologies i fear i should know this… thank you

sam

John Moffat says

Your mistake is the order cost.

It should be 2 x 9,000 x 160 (not 40)

Divide by 3.20

So square root of ((2 x 9,000 x 160) / 3,20 ) = 949

Sam says

Thank you…

Naseef says

Mr John,

Thank you for the lectures. When i was doing a few examples from kaplan study text, I noticed that the the discount was not applied when calculating the holding cost, it was only applied on the purchase cost. So I am a bit confused whether to apply the discount whilst calculating holding cost. Please clarify? Thanks

John Moffat says

It depends how the holding cost is given. If it is given as a $ amount per unit (e.g. holding cost is $2 per unit), then it stays at that amount even if there is a discount on the purchase price.

If the holding cost is given as a % of the purchase price, then as the discount reduces the purchase price it also reduces the holding cost.

Naseef says

Thank you very much for taking the time to reply. I understand the logic now. Good day.

sivarubini says

Mr. John,

Kindly advice me on the following;

where D= 40,000 Purchase price= $25 Ordering cost= $20 Holding cost= $2.5

EOQ= 800 units

Purchase price = $ 1,002,000

Ordering cost = 8*20 = $ 160

Holding cost = 10% of 25 of 99% = 2.48* 2500 = 6,187.5

When we order between 5,000- < 10,000

Purchase price you have calculated by 40,000*99% *25 = $ 990,000

But I have calculated in other way 1,002,000*99% = $ 991,980

Why the difference of $ 1,980 arises?

I have worked for some other questions both the way I'm getting the same answer.

Am I going wrong anywhere?

Please help me

John Moffat says

I don’t know where you have got 1,002,000 from!

If there is no discount, then if you are buying 40,000 a year at a cost of $25, then the total purchase price is $1,000,000.

If there is a discount of 1% then the total purchase price is $1M less 1% (or $1M x 99%).

Also, the total order cost is not $160 a year!! If they are ordering 40,000 a year with an order quantity of 800, then they are placing 40,000/800 = 50 orders a year.

I do suggest that you watch the lecture again because you seem to be confusing all of the figures.

The answer and the approach in the lecture is correct!

sivarubini says

Thank you Mr.JohnJohn

I went wrong in calculating purchase price ( It’s only $1m and not $1,002,000)

thaohuyen67 says

Hi Mr John,

Can you give me some advice on the following?

QUESTION : A company uses an items of inventory as follows :

Purchase price: $ 25 per unit

Annual demand : 1800 units

Ordering cost : $ 32

Annual holding cost : $ 4.5 per unit

EOQ: 160 units

What is the minimum total cost assuming a discount of 2% given on orders of 300 and over? ( This is the question 6.19 from BPP revision kit)

My answer is :

TC= OC+ HC + Cost of inventory

=D/Q * Co + Q/2 * Ch + D* purchase price

= 1800/300 * 32 + 300/2 * 4.5 + 1800 * 25 *0.98 = 44,967$

But their answer is 44,953.5 because there is a little different with my answer. They change total holding cost at a discount 2% . I donβt know why? In the comment lecture you said β It depends how the holding cost is given. If it is given as a $ amount per unit (e.g. holding cost is $2 per unit), then it stays at that amount even if there is a discount on the purchase price.

If the holding cost is given as a % of the purchase price, then as the discount reduces the purchase price it also reduces the holding cost. β

Please explain it for me.

Many thanks,

Thao Huyen

John Moffat says

Please ask in the F2 Ask the Tutor Forum – not as a comment on a lecture.

thaohuyen67 says

Yes,I’ll learn from experience for next time , thank for your answering in the F2 Ask the Tutor forum.

John Moffat says

No problem π

protoblade says

John, in the exam. at minute 25:00. The holding cost price after discount is 2.4625. Do we have to put it into 4 decimal places or 3? or if there more decimal places, do we have to put all of the numbers?

John Moffat says

For an exercise on quantity discounts it is best to use the exact figure.