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THE AVERAGE INVENTORY HELD THE FORMULAR IS = EOQ / 2 + BUFFER INVENTORY PLEASE SHOW ME AN EXAMPLE AND ALSO SHOW HOW YOU GET THE BUFFER INVENTORY.
TOTAL HOLDING COST
Please do not type in capital letters.
Have you watched my free lectures on this?
Do not just learn a formula. If there is no buffer (or safety inventory) then the average inventory is the order quantity divided by two (as is explained in my lectures). If they decide to hold a buffer of (say) 10 units, then the average inventory will be higher by 10 units throughout the year.
How they decide on the level of buffer inventory is up to the company – there is no rule. I explain in my free lectures different ways in which exam questions can have you calculate the level of buffer inventory and I explain with examples!
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