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the demand for a product is 12,500 units for a three-month period.Each unit of the product has a purchase price of $15 and the ordering cost are $20 per order placed.The annual holding cost of one unit is 10% of it’s purchase price.
what is the (EOQ) to the nearest unit?
Firstly, you have posted this in the F3 forum, but it is not examinable in Paper F3 – only in Paper F2!!
Assuming that you were meaning F2, then you use the EOQ formula that is given on the formula sheet!!!I suggest that you watch my free lecture on inventory control – the lectures are a complete free course for Paper F3 and cover everything needed to be able to pass the exam well.
In the formula D = 4 x 12,500 = 50,000 per year; Co = $20; and Ch = 10% x $15.
You must have an answer in the same book in which you found the question, and so in future you should ask about whatever it is in the answer that you are not clear about and then I will help you.
sir,thanks very much i was to post in f2 tutor forum but i admit i did a mistake.
D=4×12,500
am not getting where four is coming from because they said 3month period.please help
D in the formula for the EOQ is the annual demand – i.e. the demand over a year.
If the demand is 12,500 over three months, then the demand over a year is 4 x 12,500, because there are 12 months in a year, which is 4 times 3 months.
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