Question 1

Section B - Case 1: AquaHarvest

Scenario: AquaHarvest operates offshore kelp farms. The company requires 50,000 specialized biodegradable ropes per year for its farming operations. The cost of placing an order is $200. The holding cost per rope per year is $4.00.

Question: What is the Economic Order Quantity (EOQ) for the biodegradable ropes?

Accepted Answer

Apply the EOQ formula: Square root of [(2 * Cost per order * Annual Demand) / Holding cost per unit per year].

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Forgetting to take the square root at the end of the calculation.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA FM — Financial Management Practice Exam 6

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