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Here’s the question:
‘each unit is bought in at a cost of $2.24 from supplier…..
The total holding cost is 10% per annum of the value of inventory held.’
How do you find the total holding cost?
(i.e. what is the value of inventory held?)
I know you use Ch×Q/2 to find total holding cost. just not sure why value of inventory is related to the purchase cost of each unit.
Because the question actually says “the holding cost is 10% of the value of the inventory”.
I explain this (and why) in my free lectures. The lectures are a complete free course for Paper F2 (MA) and cover everything needed to be able to pass the exam well.