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March 3, 2020 at 10:01 am
In Qu2 when it says “cost of ordering”, this seems a bit ambiguous. I read it as the ‘re-order costs’, but it actually means ‘Purchase cost’.
John Moffat says
March 3, 2020 at 3:36 pm
It doesn’t mean the purchase cost. It means what it says – the cost of ordering a batch of material, and that is the re-order cost.
October 8, 2019 at 6:49 pm
sir i dont understand the 3rd question (Sky ltd). why do we 0.10*12 in the formula? and what is the role of the reorder quantity i.e. 1000?
October 9, 2019 at 9:28 am
The current reorder quantity is not relevant because the question asks what will be the optimal (i.e. best) reorder quantity.
For the formula we need the annual (I.e. yearly ) stockholding cost. $0.10 is the cost per month, and so the cost per year is 12 x $0.10.
July 4, 2019 at 12:00 pm
Hi? i would to find out why the period of 3 months was not taken into consideration in comparison to question three where the months were taking into account.thank you
July 4, 2019 at 3:20 pm
I don’t know which question you are referring to because two of the questions refer to 3 months people (and question three doesn’t!).
Both questions 1 and 5 have 3 month periods and in both cases the quantity was multiplied by 4 so as to make it a 12 months period.
July 15, 2020 at 9:19 am
Hi, I also don’t quite get it, when multiplied by four, the answer should be 1000 not 500, ?4 = 2
July 15, 2020 at 3:04 pm
Which question are you referring to? In question 3 there are no 3 month periods. The demand is 15,000 per year and the holding cost is 12 x $0.10 per year because there are 12 months in a year.
The multiplying by 2 is because the formula for the EOQ has a 2 in it.
Did you watch my free lectures before attempting the test?
February 27, 2019 at 10:57 am
Denny122: The holding cost is on the bottom of the formula. Therefore if the holding cost increases, the EOQ will be lower.
Since the EOQ is smaller, there will have to be more orders placed during the year. Therefore the annual order cost will be higher.
February 27, 2019 at 10:38 am
For question 4, I am unsure of why the EOQ costs will be lower when the holding costs increase? Thank you.
January 23, 2019 at 6:34 am
I’ve a question
Sky limited wishes to minimize its inventory cost. Its recorder quantity 1000units Order cost 10 per order. Holding cost 0.10 per month Estimates annual demand 15000units .
What is the optimal reorder level (to nearest 100 units).
January 23, 2019 at 10:34 am
Use the EOQ formula. It is the sq root of (2 x 15,000 x 10) / 0.10
October 24, 2019 at 12:24 pm
Sir, you forgot to multiply 0.10 by 12 as we need annual holding cost
October 24, 2019 at 2:49 pm
Goops – you are correct. Thanks 🙂
June 10, 2020 at 2:52 pm
Ha ha !!! You are Funny.
December 18, 2018 at 8:29 pm
In question 5 why is it taking cost of ordering one product 20$ as it is clearly mentioned the purchase price of one product is 15$.
December 19, 2018 at 7:40 am
But is also clearly stated the the ordering cost is $20. This has nothing to do with the purchase price.
You really should watch the free lectures before attempting the test!!
December 18, 2018 at 8:22 pm
Why is it taking 6%of reorder cost instead of cost of one unit in question 1. And how is the answer 1461 instead of 1633
December 19, 2018 at 7:43 am
The answer is not taking 6% of the reorder cost. It is taking 6% of the purchase price of $25.
The answer is 1,461 which is what results from using the formula. I have no idea how you managed to arrive at 1633!
December 5, 2018 at 2:36 am
I want to know how we got 2225 while calculating holding cost. Because we got 1600 then how about 2225? Thank you.
December 5, 2018 at 6:16 am
You will have to say which question you are referring to.
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