- November 30, 2022 at 11:44 am #672935AliSher123Participant
- Topics: 22
- Replies: 11
Sir i wanted to ask about the holding cost that is the denominator in the eoq formula (Ch)
I know you dont have the kaplan kit where there is a question Green co where they asked to find the Eoq however they added the finance cost (purchase price of one component × 3% finance cost ) and the storage costs and then found the eoq at first i excluded the cost of finance so the answer was different for eoq
In BPP , q86 section C dusty co they asked to find the eoq and they didnot add the finance cost in the eoq so which one should i follow ?
(BPP)A tutorial note is given at the back saying that adding finance cost will be acceptable (i dont know if it is for eoq or for calculating the holding and storage costs i dividually)
(Kaplan) it says that many answers came ignoring the cost of capital ie the finance cost [which is presumably wrong ]
It would be thankful if you clear this confusionNovember 30, 2022 at 3:25 pm #672949John MoffatKeymaster
- Topics: 57
- Replies: 51532
As I explain in my lectures, the interest cost applied to the purchase price is one of the most important costs of holding inventory.
If a rate of interest is given then the holding cost per unit is the rate of interest multiplied by the purchase cost (plus any other storage costs that are mentioned in the question).
- You must be logged in to reply to this topic.