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when we calculate whether the bulk purchase discount offered by supplier is financially acceptable or not in accordance with answers we consider the net impact due to following factors:
1) ordering cost change
2) holding cost change
3) Cost of materials changebut why we do not consider the impact of increased investing in inventory due to increased Average Inventory?
for example average inventory increased from 7 500 units to 15 000 units, cost of cap-l 6%, cost per unit 1$ from my point of view we should include the impact of 7500*1*6%= 450
I assume that you mean question 86 part b in the BPP Revision Kit. The answer has considered the impact of the increased inventory.
The calculates the total cost of the current policy where the average inventory is 7,500.
It then calculates the total cost of the proposed policy where the average inventory is 15,000.It then compares the two total costs in order to calculate the net benefit.
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