ACCA Financial Management lectures Download FM notes
ACCA F9 Inventory Management – Economic order quantity
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How do i download lecture note…. No download link regarding lecture note
Can I ask why we divide by 2 get the average holding cost
The inventory keeps fluctuating between the EOQ and zero – see the graph on the screen. Therefore the average inventory through the year is half way between the two.
In determining the average inventory for the handling cost, I thought that you would’ve divided the inventory units per each order by the number of times ordered per year. Why do you divide by 2 instead in every scenario for the average?
Suppose, for example, you are ordering 100 units each time. You then start with 100 units in inventory. When the level falls to zero you then receive another 100, and so on throughout the year. So the level of inventory keeps going between 100 units and zero. On average there are therefore 50 units throughout the year.
If you are still unsure, watch the relevant Paper F2 lectures (because this is revision from F2).
Can we “assume” that the examiners of the ACCA will choose “nice numbers”? Meaning in this example we have seen that all units gave irregular numbers.
Where as the optimal EOQ came to exactly 2’000,-
Meaning if my final answer to a question is 1234,9876 “maybe” there is something wrong in my calculation?
No – they won’t always be ‘nice’ numbers 馃檪
Thank you sir,
Good to know.
You are welcome 馃檪
Great lecture Sir, so the purchase price would have been relevant if it varied with order quantities?.e.g for 500 =$25;750 units =$20;1000 =$15….,so we would have had to include the purchase price as part of the total costs? Or its irrelevant regardless?
I think the quantity discounts lecture addressed my question and therefore ,you can ignore .
Yes – it does address your question 馃檪
Your lectures are awesome, I wish you had lectures for resits as well.
Thank you for your comment 馃檪