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Hello sir.
Q86 a iii & Q87 b
Why for the Q87 aiii, the overdraft savings is considered, and the calculation is totally different – we calculate Co & Ch combined to calculate affect on overdraft, and calculate bulk discount separately without using it to find total (ie calculate x0.03 instead of X 0.97)
VS
Why for Q87 b, it’s now the method you usually use in the lectures, where we combing Co+Ch+total purchase cost with bulk discount implemented to compare with previous total (100% less discount; instead of finding only discount calculation like in previous question) ? Why has the overdraft savings been ignored in this although it seems like a similar question to Q87 a iii where overdraft had been taken into consideration. Not to mention, in this scenario question, the overdraft has been specifically mentioned in the second paragraph where this question is related to, indicating we should follow the same procedure and consideration of Q86 aiii.
The examiners answer to Dusty is strange in the way that he dealt with the 3% interest cost.
However the examiner wrote a tutorial note in his answer saying the following:
‘It would have also been acceptable to revise the holding costs in (i) and (ii) to reflect the finance cost of holding inventory (e.g. $0.63 in (ii) and this approach would be awarded full credit’.That would be the way I would have answered it and it would have got full marks.
(BPP have just reprinted the examiners answer but have left out the tutorial note!)
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