4 A business currently orders 1,000 units of product X at a time. It has decided that it may be better to use the Economic Order Quantity method to establish an optimal reorder quantity.
£15/unit
Information regarding stocks is given below: Purchase price £15
Fixed cost per order £200
HOLDING COST 8% of the purchase price per annum
ANNUAL DEMAND 12,000 units
Current annual total stock costs are £183,000, being the total of the purchasing, ordering and holding costs of product
Ask the Tutor ACCA MA
EOQ
Calculate the revised annual total stock costs for product X and so establish the diff compared to the current ordering policy
Ans is 600
My ans
12000×15+(12000/1000×200)+(1000/2×1.2)
=183000
But in the ans they have used EOQ as 2000
I.e
12000×15+12000/2000×200+2000/2×1.2
182400
1. WHY EOQ is considered 2000 when in question its mentioned 1000
3y ago#2They currently order 1,000 each time, but the question asks you to calculate the EOQ to see what is the optimal order quantity.
Thank you so much sir ?
Thank you so much sir ?
3y ago#5You are welcome.
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