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Hi John and Team
I really hope I am allowed to ask this question here, it’s from the Kaplan text and I do not have anyone else to ask.
Q35 from the back of the book
A manufacturer uses 100,000 components costing $1 each at a constant rate throughout the year. The cost of making a single order for more components is $10 and the holding costs for each component are 0.5% of the average inventory value.
What is the EOQ?
A 1,411
B 14,142
C 20, 000The correct answer is C, 20,000. I obtained the correct values for the demand( 100,000) and order costs($10), but the value for the holding costs is given as 0.005, I got 0.05. Please could someone shed light on how they obtained this. How were you meant to work out the average inventory value from the information given?
Many thanks
SarahSorry,
I didn’t look at the question properly. I was treating the holding costs as 5%, not 0.5 %
Thank you.
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