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Greetings sir,
In 5.17, I do not understand why they explained in the answer section that Point D is the holding costs at the EOQ.
What happened to the ordering costs ? Is this curve not representing the total costs ?
In 6.2, to find the expected hours, if I total the standard machine hours and divide the answer by the total of budgeted units to get budgeted hrs per unit and then multiply the result with the total of the actual units produced to find the expected hours needed to produce those actual units, I get a slightly different (higher) value , thus leading to 98.3% efficiency ratio as a percentage, compared to the method provided in the answer page where they do the working for Product W, X , Y & Z separately, leading to the answer 96.2%.
Why does this difference occur ?
Thankyou.
5.17: It is a typing error. Point D is the total costs at the EOQ. However the answer to the question remains correct as Point C.
6.2: You cannot just take the total hours and divide by the total units – that makes no sense. Suppose in an extreme they ended up only producing Product W. In that case every unit produced should have take 0.2 hours – you would not use the average for all 4 budgeted products.
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