Question 1

**Section B - Case 1: AquaHarvest Ltd**

*Scenario:* AquaHarvest Ltd is a commercial aquaculture firm. Annual demand for their specialized fish feed is 50,000 kg. The cost of placing an order is $200. The holding cost is $0.50 per kg per year. The supplier currently charges $10 per kg but has offered a 2% bulk discount if AquaHarvest orders in quantities of 15,000 kg or more. AquaHarvest's current working capital metrics are: Receivables $400k, Payables $300k, Revenue $4m, Purchases $2m.

Ignoring the bulk discount for a moment, what is the Economic Order Quantity (EOQ) for the fish feed?

Accepted Answer

Use the EOQ formula: square root of [(2 * Co * D) / Ch]. Co = 200, D = 50,000, Ch = 0.50.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Forgetting to take the square root, or using the purchase price ($10) instead of the holding cost ($0.50) in the denominator.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FM — Financial Management Practice Exam 4

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