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ee co has calculated the following in relation to its inventories
buffer inventory level 50 units
reorder size 250 item
fixed order cost $50 per order
cost of holding onto one item pa 1.25 per year
annual demand 10000 items
purchase price 2 per item
what are the total inventory related cost for a year
i calculated it as total cost= holding cost +reorder cost but the author has added the purchase price also could tell me the difference, please?Buying the goods is the reason we have inventory which is why it can be argued that is an inventory related cost.
However on the wording you have typed I would not have included it (although obviously it matters if there are discounts involved, but this is less likely in Paper FM because it is all revision from Paper MA (was F3)).
If this is a question from the BPP Revision Kit, then tell me which question and I will check the wording myself 🙂
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