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intrest charge

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › intrest charge

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
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  • July 13, 2017 at 10:12 am #395720
    cindy7
    Member
    • Topics: 77
    • Replies: 33
    • ☆☆

    Mr john, have watched your free lectures on inventory control

    The annual demand for an item of inventory is 45 units. The item costs $200 a unit to purchase, the holding cost for one unit for one year is 15% of the unit of cost and ordering costs are $300 and order.
    The supplier offers am 3% discount for orders of 60 units or more, and a discount of 5% for orders of 90 units or more.

    Calculate the cost- minimising order size.

    my question is, how come the discount is only accounted for in holding costs and not in ordering costs too.

    July 13, 2017 at 1:55 pm #395761
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54835
    • ☆☆☆☆☆

    But why would it affect the cost of ordering?

    The discount means that the purchase price is lower. Since the holding cost is a % of the purchase price, then since the purchase price is lower the holding cost is lower as well.

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