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SIR THERE ISA QUESTION KXP CO IN DECEMBER 2012
IN ITS B QUESTION I DON’T UNDERSTAND WHY THEY DID NOT TAKE OVERDRAFT FINANCE COST INCREASE/DECREASE INTO ACCOUNT?
THEY CALCULATED THE ORDERING COST AND HOLDING COST AND COMPARED BOTH BUT THEY TOOK NO ACCOUNT OF OVERDRAFT FINANCE COST?
BUT IN ANOTHER QUESTION DUSTY CO DECEMBER 2019, THEY INCLUDED OVERDRAFT FINANCE COST INTO ACCOUNT?SIR I HAD ASKED YOU ABOUT DUSTY CO DEC 2019 BUT I DIDN’T GET ONE THING
THE EXMINER’S REPORT STATED THAT THE HOLDING COST COULD HAVE BEEN TAKEN AS O.63(INCLUDING OVERDRAFT FINANCE COST)
SIR IN THIS CASE WHAT I DID IS USED HOLDING COST AS $.63 AND CALCULATED BUT I HAVE ONE DOUBT
IF WE USE $.63 THEN DO WE NEED TO SEPARATLY INCLUDE SAVINGS IN OVERDRAFT FINANCE COST TO CALCULATE FINANCIAL EFFECT OF USING EOQ?The examiner’s report stated that the holding cost could have been taken as $0.63, including the overdraft finance cost.
If you use $0.63 as the holding cost, you do not need to separately include savings in the overdraft finance cost to calculate the financial effect of using EOQ. The $0.63 already includes the overdraft finance cost.
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