I am curious about using this EOQ technique when the examiner asks to do comparison about the EOQ model costs and normal cost. In some questions in Kaplan Kit, average inventory plus buffer stock is taken and in some questions, buffer stock is ignored but they have not explained the reason to do it.
Please explain it to me when to use which and if I use Buffer stock plus avg.inventory for holding cost solely, will it be correct?
For the calculation of the EOQ, buffer inventory is irrelevant.
If asked to calculate the total annual holding cost, then it is the average inventory (EOQ/2) plus the buffer inventory that is multiplied by the holding cost per unit.