thanks for the questions sir. but i have a bit of a problem with how Co affects holding costs. i initially assumed Ch as the holding costs and thought they do not have any effect on the Co

I guess you are asking about question 2? If so, then Ch is the holding cost per unit and the question asks what will happen to the total holding cost per year.

If the order cost decreases, then the EOQ decreases. If the EOQ decreases then the average inventory decreases and therefore the total holding cost per year decreases.

Example 3 says to use the information given in Example 1.

You should only be using the lecture notes if you are watching the lectures. It is in the lectures that I explain and expand on the notes (and I work through this example in the lectures). If you are not watching the lectures for any reason then you must buy a Study Text from one of the ACCA approved publishers and study from there.

I am confused about F9 chapter 4 question 2. I thought EOQ will increase when ordering cost decreases. The formulae even proved my point. But I stand to be corrected. Can you pls clarify that a bit?

The formula certainly does not prove your point!!!

The ordering cost appears as part of the numerator in the formula. If it decreases then so to does the EOQ.

(I assume you watched the free lectures on this before attempting the test? The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.)

Hello. I was just revising all these chapters by doing these practise questions. They’re really helpful . But question 5 of this question says that JIT approach may lead to more inventory shortages. But from what we’ve learnt from the lectures and notes. JIT ,tries to make sure there r no shortages of inventory when we need them by either getting suppliers to supply immeditaly and by training the working. So with this approach. Jit shouldn’t really cause of problem with inventory shortages right?

To add to what John Moffat said, assume the supplier has sent out the order but the delivery van develops a fault on the way. This would mean the client could ran out of inventory for the hours or days required to fix the van or arrange alternative transportation. That’s the risk in JIT … you have no buffer to fall on!

Hello. As part of the study programme, I want to complete the Past Exam Question (Specimen Q1) however, Q1 does not seem to have anything to do with “Management of Working Capital – Inventory”. Am I misunderstanding the study programme/the actual question or is it incorrect?

why working examples have no answers to check against mine I have worked out to make sure everything is 100% correct. Even some are straight forward but it is to maximise marks as much as possible

If you are talking about answers to the questions in this test, then a pop-up window appears with the answer and workings when you submit your answer. Maybe you have a pop-up blocker, in which case you should turn it off!!

(If you are talking about answers to the examples in the lecture notes, then the answers are all in the lecture notes. Also I work through all the example in the free lectures that go with the notes, and it is completely pointless to use the notes without watching the lectures that go with them.)

(I hope that you are watching the free lectures also – they are a complete course for Paper F9 and cover everything needed to be able to pass the exam well.)

As we know the D in the EOQ formula means one period.That not means per annum demand. So why in the two above questions where the demand was in 3 months time but we had to multiply 3 with 4 to get the annual demand?

Use any period you want, but the prior used for the demand must be the period used for the stockholding cost (Ch). So by all means use the 3 month demand, but also use the 3 month Ch. You will end up with exactly the same answer!!!

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thanks for the questions sir. but i have a bit of a problem with how Co affects holding costs. i initially assumed Ch as the holding costs and thought they do not have any effect on the Co

I guess you are asking about question 2?

If so, then Ch is the holding cost per unit and the question asks what will happen to the total holding cost per year.

If the order cost decreases, then the EOQ decreases. If the EOQ decreases then the average inventory decreases and therefore the total holding cost per year decreases.

hii john sir ,

i want to ask that in fm exam , this types of mcq/questions comes or similarly to this or way different that this?

Questions in Section A are similar, but these are just meant to be short, quick tests.

You must buy a Revision Kit from one of the ACCA Approved Publishers – they are full of past exam (and other exam-standard) questions.

Thank you John sir ??

Thanks John

You are welcome 🙂

love all them..G8 MCQs!

hi,

help plz

consider on your study notes, Chapter 4 example 3, can you help me on how to find stock holding cost ?

Example 3 says to use the information given in Example 1.

You should only be using the lecture notes if you are watching the lectures. It is in the lectures that I explain and expand on the notes (and I work through this example in the lectures). If you are not watching the lectures for any reason then you must buy a Study Text from one of the ACCA approved publishers and study from there.

Hi John,

For the annual demand, is it always in quantities? or can I say Annual Demand = Annual Sales?

You always need annual demand in units for the formula, because the EOQ is always in units.

I am confused about F9 chapter 4 question 2. I thought EOQ will increase when ordering cost decreases. The formulae even proved my point. But I stand to be corrected. Can you pls clarify that a bit?

The formula certainly does not prove your point!!!

The ordering cost appears as part of the numerator in the formula. If it decreases then so to does the EOQ.

(I assume you watched the free lectures on this before attempting the test? The lectures are a complete free course for Paper F9 and cover everything needed to be able to pass the exam well.)

Thank you

You are welcome 🙂

Hello. I was just revising all these chapters by doing these practise questions. They’re really helpful . But question 5 of this question says that JIT approach may lead to more inventory shortages. But from what we’ve learnt from the lectures and notes. JIT ,tries to make sure there r no shortages of inventory when we need them by either getting suppliers to supply immeditaly and by training the working. So with this approach. Jit shouldn’t really cause of problem with inventory shortages right?

But there is still a bigger risk of inventory shortages – however well JIT is organised, something may still go wrong 🙂

To add to what John Moffat said, assume the supplier has sent out the order but the delivery van develops a fault on the way. This would mean the client could ran out of inventory for the hours or days required to fix the van or arrange alternative transportation.

That’s the risk in JIT … you have no buffer to fall on!

Hello. As part of the study programme, I want to complete the Past Exam Question (Specimen Q1) however, Q1 does not seem to have anything to do with “Management of Working Capital – Inventory”. Am I misunderstanding the study programme/the actual question or is it incorrect?

Please ask this in the Ask the Tutor Forum, and not as a comment on a practice test!

why working examples have no answers to check against mine I have worked out to make sure everything is 100% correct. Even some are straight forward but it is to maximise marks as much as possible

If you are talking about answers to the questions in this test, then a pop-up window appears with the answer and workings when you submit your answer. Maybe you have a pop-up blocker, in which case you should turn it off!!

(If you are talking about answers to the examples in the lecture notes, then the answers are all in the lecture notes. Also I work through all the example in the free lectures that go with the notes, and it is completely pointless to use the notes without watching the lectures that go with them.)

These questions are a great help

That is good to hear 🙂

(I hope that you are watching the free lectures also – they are a complete course for Paper F9 and cover everything needed to be able to pass the exam well.)

I am working my way through the lectures and then answering the questions, they put everything i have just learnt into practice.

Great 🙂

Hi John how are we arriving to EOQ OF 945 in question 3

949***

We use the EOQ formula as I explain in the free lecture.

D = 9,000 per year; Co = 160; and Ch = 8% x $40 = 3.20

As we know the D in the EOQ formula means one period.That not means per annum demand.

So why in the two above questions where the demand was in 3 months time but we had to multiply 3 with 4 to get the annual demand?

Use any period you want, but the prior used for the demand must be the period used for the stockholding cost (Ch).

So by all means use the 3 month demand, but also use the 3 month Ch. You will end up with exactly the same answer!!!

You are saying because the cost of holding one unit is per annum so the demand must related likewise?

ok i got i tired it and got exactly the same answer.Thanks

You are welcome 🙂

Thank you. These tests really help drum in which figures to pick and perform correct calcs.

Thank you for the comment 🙂

Thanks Sir

You are welcome 🙂