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John Moffat.
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oluchiozulumba
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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
John Moffat
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For 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.
oluchiozulumba
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Thank you so much sir, I do understand
John Moffat
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You are welcome 🙂
John MoffatViewing 4 posts - 1 through 4 (of 4 total)
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