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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Cost accounting techniques
Question:
A company uses components at the rate of 600 units per month, which are bought in at a cost of $2.24 each from the supplier. It costs $8.75 each time to place an order, regardless of the quantity ordered. The supplier offers a 5% discount on the purchase price for order quantities of 2000 items or more. The current EOQ is 750 units. The total holding cost is 10% per annum of the value of inventory held.
What is the change in the total cost to the company of moving to an order quantity of 2000 units?
Sir please explain $730 saving as answer to this question
There is not much point in me simply typing out the answer – if you are using a Revision Kit from one of the ACCA approved publishers (as you should be) then without doubt it will show the workings. If any of the workings do not make sense then ask about whichever bit you are unsure about.
Assuming of course that you have watched my free lectures!! I work through examples similar to this one, and if you have watched the lectures then you should not really be having a problem. (And I trust you are not attempting questions without having studied first – that would obviously be stupid 🙂 )