Hello Sir,
Thank you for this platform, please sir, i would like to understand how the cost driver for "number of purchase order for despatch" was calculated i.e the cost per order in arriving at 658.33.
Thank you in advance
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June 2014 question 1b
10y ago#1For product X, they are producing 20,000 units.
According to the question they are producing in batches of 500 units each time.
Therefore they produced 20,000/500 = 40 batches.
The question also says that there are 4 purchase orders per batch, and therefore there must have been 4 x 40 purchase orders.
Doing the same for the other 2 products results in a total of 480 purchase orders, and the cost per order is calculated by dividing the total ordering cost by 480.
Thank you so much sir, I do understand
10y ago#3You are welcome :-)
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