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Total Annual Cost – Holding cost question

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Total Annual Cost – Holding cost question

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
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  • September 22, 2018 at 8:18 pm #475545
    kingkongsajang
    Member
    • Topics: 95
    • Replies: 75
    • ☆☆

    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.

    Kind regards,
    Hwan

    September 23, 2018 at 8:06 am #475556
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51576
    • ☆☆☆☆☆

    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.

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