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The average inventory held

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › The average inventory held

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • April 24, 2024 at 3:57 pm #704504
    dangkhoa.nhhtd
    Participant
    • Topics: 49
    • Replies: 33
    • ☆☆

    Hello tutor,

    I have a question relating to the formula of the average inventory held: Average inventory held = EOQ/2 + buffer inventory. But there is also another formula: verage inventory held = EOQ/2. These make me confused as in some cases it works with the first formula; in other cases, only the second. How can we make sense between these two formula?

    Thank you tutor!

    April 25, 2024 at 7:12 am #704516
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54705
    • ☆☆☆☆☆

    The buffer (or safety) inventory is extra inventory held throughout the year to cover against uncertainty in the lead times. In a perfect world there would be no uncertainty and therefore the buffer inventory would be zero (so the second formula).

    Whether or not it is relevant in an exam question depends on the wording of the question as to whether or not there is any buffer inventory held.

    Have you watched my free lectures on this?

    April 25, 2024 at 5:21 pm #704544
    dangkhoa.nhhtd
    Participant
    • Topics: 49
    • Replies: 33
    • ☆☆

    Thank you tutor for your explaination. I will watch your lecture on this issue.

    April 26, 2024 at 9:30 am #704566
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54705
    • ☆☆☆☆☆

    You are welcome

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘The average inventory held’ is closed to new replies.

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