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Free ACCA & CIMA online courses from OpenTuition
Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams
Free ACCA & CIMA online courses from OpenTuition
Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams
I completely missed question 3 , what is the formula to calculate reorder quantity.
Optimal order quantity means the same as the economic order quantity 馃檪
thank you John , Got it.
Good morning sir, i dont seem to understand question 3. I thought the holding cost is $0.10 per unit per month which is 0.10 x 1000 x 12 giving 1,200. How come it is only multiplied by the months without the order units? Please can you explain this?
The optimal order quantity is the EOQ – the fact that they are currently ordering 1,000 per month is of no relevance at all.
Secondly, the holding cost used in the EOQ formula is the holding cost per unit per year, which is 0.1 x 12.
If you have not already done so then I do suggest that you watch my free lectures on this.
Nice challenge got 100%
Good day sir. I don鈥檛 seem to get qn 1 and 5 correct no matter how i follow the given workings. Where might i be going wrong?
I don’t know what you have done wrong because I cannot see your workings. Have you noticed that in both questions in mentions 3 months and you need to convert them to years? (And have you looked at the workings for the answers that appear if you click ‘review quiz’ after submitting your answers?)
Very useful!!!
Good day sir, just a question: Q: what would be the effect on EOQ and ordering costs, if there is a decrease in holding costs?
The opposite of my answer to the question immediately below yours!! 馃檪
The EOQ will increase, and because it is higher there will be fewer orders place during the year which means that the total ordering cost over the year will be lower.
Hello sir!
I couldn’t solve the Qu4. Doesn’t the EOQ increase when the holding cost increases? I also didn’t understand the relation between ordering cost and holding cost.
Thanks in advance!
The holding cost is on the bottom of the formula for the EOQ, so if the holding coat increases then the EOQ will decrease.
If the EOQ is lower then it means that more orders will have to be places during the year. If there are more orders then the total ordering cost over the year will be higher.
Hi sir, in the 1 st question it says three month so why did you multiply it by four by the way thank you for the lecture
Ohh sorry ,I got the answer
Such an important eye opener quiz. Thankyou. Grateful.
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’.
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.
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?
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.
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
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.
Hi, I also don’t quite get it, when multiplied by four, the answer should be 1000 not 500, ?4 = 2
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 $0.10 per year because there are 12 months in a year.
The multiplying by 2 is because the formula for the EOQ has a 2 in it.
Did you watch my free lectures before attempting the test?
Denny122: The holding cost is on the bottom of the formula. Therefore if the holding cost increases, the EOQ will be lower.
Since the EOQ is smaller, there will have to be more orders placed during the year. Therefore the annual order cost will be higher.
For question 4, I am unsure of why the EOQ costs will be lower when the holding costs increase?
Thank you.
I’ve a question
Sky limited wishes to minimize its inventory cost.
Its recorder quantity 1000units
Order cost 10 per order.
Holding cost 0.10 per month
Estimates annual demand 15000units .
What is the optimal reorder level (to nearest 100 units).
Use the EOQ formula. It is the sq root of (2 x 15,000 x 10) / 0.10
Sir, you forgot to multiply 0.10 by 12 as we need annual holding cost
Goops – you are correct. Thanks 馃檪
Ha ha !!! You are Funny.
In question 5 why is it taking cost of ordering one product 20$ as it is clearly mentioned the purchase price of one product is 15$.
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!!
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
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!
I want to know how we got 2225 while calculating holding cost. Because we got 1600 then how about 2225?
Thank you.
You will have to say which question you are referring to.