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Hello, can you help me explain the solution to this question:
PQR has demand of 7500 units per month. Each unit costs $5, ordering costs are $100 per order and the inventory holding cost is 10% of purchase price per year.
There is a lead time of 30 days between placing an order and receiving delivery.
If they order the EOQ each time, at what level of inventory should a new order be placed? (to the nearest unit). Assume 365 days.
Why are you asking about a question for which you do not have an answer? You should be using a Revision Kit from one of the ACCA approved publishers – they have answers and explanations.
Given that they need to place a new order in order to make sure that they do not run out of inventory, they need to reorder when they have enough units in inventory to last them for 30 days.
“Assume 365 days’ is a statement than means nothing to anyone.
Have you watched my free lectures? The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well. Obviously questions on inventory control are rare in Paper FM because everything has already been examined in Paper MA (was Paper F2).
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