Hi sir,
I have doubt in this part d) with discount why in holding cost ch*Q/2 why they didn’t did discount here. They only apply discount in purchase cost why ?? Usually we do discount in purchasing cost and holding cost. Can you please explain e why they didn’t did discount in holding cost. I see in most qstns they didn’t did discount in holding cost. But I see your lectures in that eg 3) have discount in both holding and purchasing. I am very confused now can you please explain me the reason. Thank you in advance.
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FLG co (jun 2008)
5y ago#1If the holding cost is given in $'s as it is in FLG, then it stays at the same cost whether or not there is a discount.
If, on the other hand, the holding cost is given as a % of purchase price (as in my lecture example) then if the purchase price is lower because of the discount then the holding cost is automatically lower as well.
Oh I see. Thank you so much sir I understand your explanation. Thanks
5y ago#3You are welcome :-)
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