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Hello Tutor!!
I wanna ask you that in Requirement a(i) of dusty co. CRQ, why they use $0.21 as holding cost and didn’t add $0.42 (3% of $14) in holding cost because if finance cost is given it means we use that finance cost to calculate total holding cost and also to calculate EOQ.I do not have the Kaplan Kit, but I do have the original exam question.
The examiners answer has a note below the answer (I don’t know whether or not Kaplan has printed this note) which says: “It would also have been acceptable to revise the holding costs in (ii) and (iii) to reflect the finance cost of holding inventory (e.g. $0·63 in (ii)) and this approach could be awarded full credit if correct.”
Exactly that’s what I wanna ask that is this also acceptable to use holding cost as $0.63 in part (i).
Furthermore if examiner saying that we can use $0.63 as holding cost in part (ii) then why I’m getting different EOQ and different savings in Part (ii).
According to examiner, savings due to use of EOQ would be $17,199 but my savings are $20,000 (something).
If you want I can show you my workings for part (ii).Obviously using 0.63 as the holding cost will give a different answer, but the examiner made it clear that the different answer would also get full marks.
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